Thursday, 22 December 2016

Post Demonetization: Compulsions and Confusion


            Congress spokesman S. Surjitwala nomenclature Reserve Bank of India as Reverse Bank of India, since, the central bank has reversed the order following protest from customers and bank employees.  Two days ago, the RBI has issued directives to the banks regarding one time deposition of old currency notes above Rs 5000 by the customers and to explain at least to two bank officials regarding delay in deposition of these notes.  Following protest, the RBI withdrew its circular.  The bank federation, on December 21, protested against frequent changes in rules and regulations by RBI which leads to confusion.  Some of the banks are protesting in view of availability of less cash.  The union opined that the duty of bank officials is related to banking system and not of investigative agencies.  Another objection is on availability of cash to PSU banks vis a vis private banks; the HDFC, Axis and ICICI are getting sufficient cash.  Third, circular issued by RBI reaches bank branches after three days, but, announce it immediately through media and then people confronts with bank employees that leads to chaos.  Smooth supply of cash to semi urban and rural area is the biggest worry; the public is confronting with bank officials for want of cash especially of small denomination notes.

            The economic affairs wing of central finance ministry simultaneously issued circulars along with RBI; it creates embarrassment among customers and bankers.  From November 8, sixty circulars / orders / amendments have been issued by aforesaid agencies.  In the last communique the RBI amended the circular regarding KYC compliance that unnecessarily resulted in wrath from the customers.  Restriction on withdrawal of money is another confusion and confrontation issue; “the movement they (government and RBI) take away the restrictions, everybody will want to go and draw out a lot.  That becomes a problem.” SBI Chairman Arundhati Bhattacharya said.

            Another compulsion is RBI Governor and Economic Affairs Committee Secretary of Central Government will have to explain the detail facts regarding demonetization to Parliamentary Public Accounts Committee headed by Veerappa Moily in the second week of January.  Let us see the outcome of the PACs stricture and recommendations.  Only positive side is, till date RBI has released new currency of Rs 5.92 lakh crores and till mid of January sufficient currency will be circulation.  The Monetary Policy Committee of RBI has stated that the policy will have negative impact over industrial output.

            From the day one the RBI Governor Mr Urgit Patel is in limelight for one or the other reasons.  Like a shuttle, Mr Patel is unnecessarily moving from pillar to post and facing the orchestra from all the side.  He has no say in policy implementation; it suffices from the way the things are changing like chameleon from the day of announcement of the policy.  Probably, Raghuram Rajan (Ex RBI Governor) could not have yielded to the move from PMO office; this might be one of the reasons of his exit from the illustrious post.
       

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