RBI: note ban talks began in Jan 2016

Parliamentary panel questions Guv

RBI Governor Urjit Patel on Wednesday told a Parliamentary panel that discussions over demonetisation had started with the government in January 2016 and the final decision was taken on November 8.

Members of the Parliamentary Standing Committee on Finance put a volley of questions to Patel and top finance ministry officials, but voiced dissatisfaction over their inability to assure them when banking operations will return to normal.

However, Patel told the committee chaired by senior Congress leader M Veerappa Moily that the central bank will supply as much cash as required.

He told the committee that Rs 9.22 lakh crore has been injected into the banking system since the November 8 decision to scrap Rs 500 and Rs 1,000 currency notes. At the same time, Patel said he would be unable to give an estimate on the total amount deposited with the banks in scrapped currency.

The demonetisation decision rendered Rs 15.44 lakh crore or 86% of the total currency in circulation as “illegal tender”. In a written reply to the committee, Patel said the government had “advised” the RBI on demonetisation on November 7 last year, a day before Prime Minister Narendra Modi made the announcement in a dramatic televised address to the nation.

Patel was assisted by RBI Deputy Governors R Gandhi and S S Mundra in their interaction with the committee. Earlier, in the morning session, Economic Affairs Secretary Shaktikanta Das, Revenue Secretary Hasmukh Adhia and Financial Services Secretary Anjuly Chib appeared before the committee.

Congress members Digvijaya Singh and Jyotiraditya Scindia wanted to know who took the decision to scrap currency notes and whether the decision impinged upon the autonomy of the RBI.

They also wanted to know why the government changed goalposts frequently by first declaring demonetisation as a fight against black money and terror funding, and later contending that the purpose was to promote cashless economy.
Manmohan to Patel’s