New Delhi: While RBI Governor Urjit Patel testified for a parliamentary committee on Wednesday on how the sudden notes ban was planned and implemented, former Prime Minister Dr Mamnohan Singh quickly intervened to help him on a tricky matter.
Dr Singh, who served as the top boss of the central bank before his terms as Finance and Prime Minister, advised Mr Patel not to reply to questions which could create problems for the central bank, whose autonomy, according to critics, has been depleted by its role in the demonetization drive.
Sources on the Standing Committee of Finance, which had summoned Mr Patel today, said that in particular, Dr Singh jettisoned a question raised by an MP from his party, the Congress, about whether “chaos” would break out if the existing restrictions on cash withdrawals are removed. “You should not reply to that query,” Dr Singh counselled.
Yesterday, the RBI announced that the daily limit for pulling out cash from ATMs has been raised from Rs. 4,500 per day to Rs. 10,000. However, no more than Rs. 24,000 per week can be withdrawn per savings account.
On November 8, Prime Minister Narendra Modi announced that 500- and 1,000-rupee notes would be illegal within a few hours, a move aimed at unearthing black money and fighting tax evasion and corruption. The sudden announcement created a huge cash shortage with 86% of the notes in circulation suddenly declared abolished. Mr Patel today refused to provide any figure for how many of the banned notes had been deposited into the banking system and he did not provide clarity on when the cash situation would become normal.
In November, Dr Singh tore into PM Modi in a speech in parliament, calling his move an “organized loot and legalized plunder” of the country. He also said demonetization will cost the GDP two percentage points, describing that as “an underestimate and not an overestimate.”