NEW DELHI: Reserve Bank of India (RBI) Governor Urjit Patel told the Public Accounts Committee (PAC) on Friday that the cash crunch post-demonetisation will normalise soon. Explaining the note ban to the PAC members, Patel told them the efforts are being made to normalise cash crunch in rural areas.
However, more than 72 days after the demonetisation, the RBI has said it still does not know the “exact number” of junked currency notes in circulation and it is still “reconciling” the number of notes returned. In a written submission to the PAC, the RBI said: “The exact number of Specified Bank Notes withdrawn from circulation is being worked out.”
Earlier, as soon as the meeting began, Thomas, a Congress MP, made a statement on demonetisation, prompting protests from BJP members, including Bhupender Yadav, Kirit Somaiya and Nishikant Dubey.
Citing the amendment in the RBI Act in 2016, they said any question asked of Patel must be in the context of the RBI’s monetary policy and not outside it.
After a long debate, the panel agreed that questions on demonetisation can be asked, but only in the context of monetary policy.
It is learnt that Patel said cash flow position has largely improved. However, there were some problems in remote rural areas and members were assured that it would improve in the next couple of weeks. To questions on the impact of the demonetisation on growth, Patel said there may be an effect in the short run, but in the mid- and long-term the move is beneficial for the economy.
Members asked a host of questions of the RBI governor, who has been given 15 days to respond to the queries.
Later talking to reporters, Thomas said the committee will again meet on February 10 to discuss the issues with Finance Ministry officials, adding that Patel could be called again if required after February 10.
During the nearly four-hour meeting, the panel asked about significant surge in deposits in cooperative banks and asked the RBI to look into it. Sources said the central bank informed the PAC that agencies like Financial Intelligence Unit and Income Tax Department are looking into abnormal deposits.
According to a report by the RBI to a parliamentary panel on Wednesday, about Rs 60,000 crore ($9 billion), more than the Rs 9.1 trillion of currency in circulation, was withdrawn by the public as of January 13.
This has flummoxed experts. “This is usually not the case,” said Sujan Hajra, chief economist at Anand Rathi Securities Ltd. in Mumbai, who was a director at the RBI from 1993-2006. He said cash with the public should be lower than the currency in circulation “but then you don’t have demonetisation usually”.