New Delhi: Reserve Bank chief Urjit Patel has told a parliamentary panel that the process of demonitisation started in January, sources told. This was an apparent contradiction of his earlier written response to the panel that said the government had “advised” the central bank to cancel high-denomination notes on November 7, a day before Prime Minister Narendra Modi announced the ban on high denomination notes of 500 and 1000 rupees.
Back in January 2014, the government had done a partial withdrawal of a series of 1000-rupee notes, Mr Patel told parliament’s Standing Committee on Finance which is led by Veerappa Moily of the Congress.
Sources said officials of the finance ministry, who also appeared before the panel, refused to respond to questions on how much money has been printed so far and how much money, in banned notes, has been deposited since the ban on November 8.
The RBI chief told the panel that Rs. 9.2 lakh crore in new currency has been circulated into the system. But he added that it was not possible to say when bank operations will be normalised.
On Friday, Mr Patel is expected to meet another committee headed by KV Thomas of the Congress, who had controversially announced that if needed, he would summon Prime Minister Narendra Modi as well to answer questions. The BJP members of the committee objected to this pronouncement and the panel over-ruled Mr Thomas.
The RBI has been criticised for allowing its autonomy to be compromised by failing to carry out necessary checks ahead of banning the notes, which created a massive cash shortage and forced people to stand in long queues at banks. ATMs had not been calibrated to dispense the new, bigger-sized notes that were introduced; the new bills also remain in shorty supply.
Through the demonetization drive, rules for cash allowances for people were changed frequently. The RBI has still not declared how much of the 15.44 lakh crores in banned notes has been returned to banks (some reports estimate it’s as high as 97%).