Demonetisation: Urjit Patel says RBI pumped in Rs 9.2 lakh cr of new notes

The Reserve Bank of India (RBI) has injected 9.2 trillion rupees ($135.21 billion) worth of new currency notes into the banking system to help replace the notes banned in November, a parliamentary panel member quoted central bank Governor Urjit Patel as saying on Wednesday.

Patel met the panel on finance to answer questions about the 8 November abolition of Rs 500 and Rs 1,000 notes, or 86 percent of the currency then in circulation, in a bid to unearth billions of dollars of unaccounted money.

About 15.4 lakh crore rupees worth of the notes were removed from circulation.

 Demonetisation: Urjit Patel says RBI pumped in Rs 9.2 lakh cr of new notes


Patel, however, failed to provide any figure for how many of the banned notes had been deposited into the banking system. He did not provide clarity on when the cash situation would become normal, according to a second member of the panel who was also present at the appearance.

Both the members spoke on the condition of anonymity as the panel's deliberations are confidential.

The RBI governor also told the parliamentary panel that consultations between the government and the central bank on demonetisation had began in January 2016, the second panel member told Reuters.

However, the government notified the RBI it wanted specifically to scrap 500 and 1,000-rupee notes on 7 November 7, a day before the RBI board formally approved the recommendation, the member said, citing a note sent to the panel by the central bank. Modi then announced the decision later on 8 November.

The ban sparked a severe cash crunch that has disrupted economic activity, leading to the biggest monthly fall in automobile sales in 16 years in December. The slump coincided with a contraction in services industry and manufacturing activity.

The International Monetary Fund (IMF) on Monday cut a full percentage point off India's GDP growth forecast to 6.6 percent, in the fiscal year that ends in March 2017, citing the blow to the cash-reliant economy.

The IMF also trimmed the growth outlook for the fiscal year 2017/18 to 7.2 percent from 7.6 percent estimated earlier.

On Wednesday, two top finance ministry officials also appeared before the panel to present the government's position.

The member said the panel would summon Patel again after the upcoming parliament session.

Updated Date: Jan 19, 2017 08:14:28 IST