Demonetisation: Ex-PM Manmohan Singh comes to central bank chief's help

New Delhi, Delhi, IndiaWritten By: Kartikeya SharmaUpdated: Jan 18, 2017, 02:33 PM IST

Urjit Patel. Photograph:(AFP)

The chief of India's central bank, Urjit Patel, received support from the most unlikely quarter while he was being grilled by an opposition party leader Digvijay Singh during a meeting with the parliamentary committee about demonetisation on Wednesday.

When asked by Digvijay Singh, a member of the Congress party, as to whether there would be chaos when the withdrawal limit is removed, former prime minister Manmohan Singh, who is also a Congress member, told Patel that he need not answer that question.

The government yesterday (January 17) raised the withdrawal limit from Rs 4,500 per day to Rs 10,000 per day, although the weekly limit remains Rs 24,000.

It was an unexpected show of support because Singh is not only a member of the same party as Digivijay Singh is, the renowned economist has in the past flayed the government's decision to scrap old banknotes as he believes the move will pare down India's economy by two percentage points.

During the Wednesday meeting, Patel, who is the governor of Reserve Bank of India, was chastised for not satisfactorily replying to questions regarding demonetisation, nearly three weeks after the deadline for people to exchange their old currency notes with new ones elapsed.

Saugata Roy, a member of the panel and a lawmaker affiliated to Trinamool Congress, said Patel was "unable to tell us how much money (old currency) has come back to the banks".

One of the members of the standing committee of finance, wishing anonymity, confirmed to WION that when asked as to when the details would be available, the RBI officials replied that they were calculating at the moment and could not give a timeline to the committee.

The federal government had given the public time till December 30 to replace their old currency notes with new ones.

As of December 14, various media reports stated that the banks in India had received 80 per cent of the old bank notes amounting to Rs 12.44 lakh crores (roughly $184 billion).

But Patel did inform the quantum of amount infused into the economy. He said Rs 9.2 lakh crore (approximately $135 billion) worth of new currency notes has been injected back into the economy so far.

The Standing Committee of Finance, headed by Veerapa Moily, grilled the finance ministry officials and Patel for nearly two hours. Overall, the meeting lasted for four hours but Patel joined the briefing session in the second half.

When one of the members questioned Patel on the emphasis been given by the prime minister and finance minister on turning India into a cash-less economy, Patel replied: "The demand will be met with supply and it is the prerogative of the Reserve Bank of India.”

Government officials also informed the committee that demonetisation was a well thought-out decision and preparations were on since January 2016.

India's central bank had earlier given a seven-page reply that it received advisory instructions from the government to consider the government's plan to replace the hitherto currency notes. But several questions were raised when it came to light that the RBI had received the advisory on November 7, barely 24 hours before the government rolled out the nationwide scheme.

India's central bank came under a deluge of criticism as many felt that the institution's autonomy had been undermined. The theme of RBI's autonomy dominated the Wednesday meeting as well, with Patel fielding a raft of questions about the issue, another member of the panel told WION. 

Meanwhile, WION has learnt that Patel will be summoned again either during the Budget Session (February 1) or just after it as a lot of questions remained pending due to paucity of time. 

But problems don't end for Patel there as he is expected to depose before the Public Accounts Committee on January 20, where opposition parties are expected to ask him uncomfortable questions about how the decision on demonetisation was reached upon. The very debate on demonetisation and the RBI's autonomy has become extremely political as regional elections in five states of India are merely 20 days away. 

(WION with inputs from ANI)