Demonetisation failure: Did RBI get enough time to prepare?
- No one knows the actual amount of money coming into the banks post demonetisation nor the amount of new currency printed
- Most of the times the RBI had difficulty in conveying their orders to the nation’s subordinate banks
The Reserve Bank of India has come under severe criticism for its current see-sawing on the issue of demonetisation. Questions have been raised on the credibility of the institution. It certainly is a worrying situation because then it means that the Indian economy is in trouble.
Manomohan Singh had used the term ‘monumental mismanagement’ to describe what the implementation of a currency ban had been in India. We must take note that while he was supportive of demonetisation it was the ‘implementation’ that he questioned.
Now, according to a report in the Indian Express during a meeting of the Parliamentary Committee on finance, Singh questioned whether the RBI was given sufficient time to hold deliberations on the government’s demonetisation move.
Surprising, isn’t it? Matters related to a country’s finance are being decided by the government without the biggest financial institution in the country even been consulted on the impact. If this is the case then we must question the planning of Modi before holding the RBI accountable.
News also has it that Modi had prepared the demonetisation speech well in advance of November 8 and this then indicates that people were in the know of the event much before. Does that knowledge extend to the RBI as well?
With the conduct of the RBI and its Governor Urjit Patel coming under the scanner, it is more likely that the financial leg of the plan’s implementation would have been the last to know. Otherwise how do you explain the changing and backtracking on close to 60 orders being passed by the RBI since demonetisation, including the u-turns it has made on cash deposit and withdrawal rules in this period?
The most recent one being that the RBI has exempted the KYC account holders from the ₹5,000 deposit limitation, a U-turn on its previous rule. So much has happened that now the RBI is called the Reverse Bank of India.
None of this shows the preparedness of the RBI to tackle an issue that affects the economy and the lives of millions of people.
No one knows the actual amount of money coming into the banks post demonetisation nor the amount of currency printed. Why is there so much of inaccuracy and secrecy? Shouldn’t the nation be allowed to know how much its efforts of standing in line has paid off and when the new currency is coming in?
Last known, the RBI Deputy Governor R Gandhi has announced that ₹12.4 lakh crore of old notes scrapped have been deposited in banks till December 10. Banks have issued ₹4.61 lakh crore to public since November 8-9 through automated teller machines and bank counters, of which 20.1 billion pieces belong to the small denomination of ₹10,₹20, ₹50 and ₹100. The rest, 1.7 billion notes have been issued in the ₹500 and ₹2,000 denomination, Gandhi had added in the press conference. Again he said that the RBI had been printing “more and more” notes to ease the cash crunch but there was no update on the figure.
Anything planned in haste ends in ruin or encounters roadblocks when compared to a well-planned, and executed plan. Most of Modi’s plans announced post November 8 seem to be a surprise to the RBI as well. Most of the times the RBI had difficulty in conveying their orders to the nation’s subordinate banks. Orders used to be passed in the morning and even after two days the rest of the banks would still be unaware. Often banks had this to say “We have not received our orders from the RBI or..the RBI has not sanctioned enough cash.”
Let’s not get started on the current state of the country after over a month of demonetisation! Nor do the banks have cash and nor do the people. The banks not having cash could probably be because it is being distributed to all who can afford to get their hands on it first through underhanded ways.
So the conclusion we can draw out of all this chaos is that only Modi and his band of merry men knew in full detail about the demonetisation. The RBI was clueless. Lack of preparation, research and method of implementation has landed India in one of the worst financial crisis of all time. So who do we hold accountable?