RBI - ITS VERY INTEGRITY AND ABILITY UNDER QUESTION

By Ruma Dubey

Yesterday, Urjit Patel had the perfect place and time to come clean, save his and the reputation of RBI. But he failed, oh so miserably!

In fact after reading his answers or rather the answers which he did not give to the Parliamentary Panel, we cannot help but wonder as to how will RBI look after a few years from now if the same trend continues?

RBI is a relatively autonomous body; at least that is what we thought till a few months ago. RBI’s Governors being asked to the toe the line of the Government is nothing new, in fact there are constant war of words between the Govt, especially Finance Minister and the RBI Governor. Be it Subba Rao or Raghuram Rajan, in recent times, they all have had their shares of wars but ultimately, the Governor did what he felt was right and not what the Govt wanted him to do. Here, with Urjit Patel, the relationship is rosy, all hunky dory and somehow, none of us can shrug the deep rooted feeling that the RBI today stands compromised.

This feeling became all the more deeper after the way he conducted himself in the MP Panel yesterday. He heads the central bank of India yet he seemed so vague and had not come prepared with the numbers. For an RBI Governor to not know the basic numbers even two months after demonetization was shocking.

What did come forth from the answers is that demonetization was indeed at the behest of the Government. Yes, the RBI did know beforehand that the Govt was thinking of such a move but what we do not know is whether RBI had no choice but to toe the line, agree to this note ban without having systems in place?

And what we also learnt is that since November, Rs.9.2 lakh crore of new currency notes have been introduced. But the most pertinent question of all – how many of the banned notes were deposited in the banks? This is the answer we all seek to understand whether this demonetization has achieved its objective but even Patel does not know this answer! Agreed it is a mammoth task but Patel could have given at least the numbers they have till now? The last update we got was on 13^th December when RBI said that as at 10^th December, 12.44 lakh crore currencies had been deposited. It is over a month since that last update; Patel does not know the number till 10^th Jan even?

What irks is this lack of transparency, this feeling that actual numbers are not being given and what will come out will also be “cooked.” That trust element has simply vanished in one instant. Why can’t RBI be forthright and share information? Why this shrouded-in-mystery working?

Another important question had no answer – when will the cash shortage situation ease, with removal of restrictions, with banks returning back to normalcy? As per Patel, if 60% of the cash is already back in the system as new money, how come the weekly limit of Rs.24,000 still persists and many ATMs continue to remain nonfunctional? This lack of information of the timeline of normalcy is detrimental; it is leading to hoarding, exactly same as before only now it requires lesser space due to the Rs.2000 notes in circulation.

RBI’s integrity and way of working, its efficiency is all under a cloud. Urjit Patel could have done more but he has in fact darkened this cloud.