As the currency circulation in India gradually normalises following the recent demonetisation, Reserve Bank of India Governor Urjit Patel on Friday is learnt to have said that the cash situation in the country will normalise “soon”. Patel was answering queries before the Public Accounts Committee to explain to the lawmakers demonetisation and its impacts.
Speaking to PAC members, the RBI governor also informed them that tghe central bank is in talks with service providers and banks to reduce transaction costs. He also added that the recent demonetisation step of the government has short tem affect on Gross Domestic Product (GDP) and will have a a positive impact in mid and long term.
Congress MP KV Thomas is the chairman of the PAC, and Veerappa Moily is the head of the finance committee.
Earlier this week, Patel had told the Parliamentary Standing Committee on Finance that new currency notes worth Rs 9.2 lakh crore have been introduced into the system post the removal of old notes.
Prime Minister Narendra Modi, in a surprise move on November 8, demonetised high-value currency notes in order to curb the menace of black money, sucking out 86% of cash currency in circulation in the country. The total value of the demonetised Rs-1000 and Rs-500 notes was at Rs 14.6 lakh crore.
PAC members are also understood to have asked Patel whether the government interfered in RBI’s functioning in trying to push the note-ban move.
Members of the opposition have repeatedly targeted Patel for tarnishing RBI’s reputation by not maintaining its autonomy and giving in to the demands of the government. Congress leader Ghulam nabi Azad even asked for Urjit Patel’s resignation, claiming that the central bank has become a rubber stamp of the government and has lost its autonomy.
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According to media reports, Patel could not reply to questions like when normalcy would be back in the banking system and how much of demonetised currency was deposited during the 50-day window, when asked by the Parliamentary Standing Committee earlier this week.
However, former Prime Minister and Congress leader Manmohan Singh came to Patel’s rescue, saying that the RBI governor must not be put to odd and embarrassing questions.
Government is pushing hard for use of digital currency and moving towards a cashless economy, in order to keep a better record of transactions, limiting the use of black money.
It has announced incentives on using digital wallets in forms of cash-back on making payments for various utilities such as petrol and daily dairy supplies. It has also built India Stack – a set of open APIs contributing towards a digital infrastructure to facilitate cashless and paperless delivery of services through electronic verification, data transfers, digital lockers and more. India stack has drawn praise as being a cutting-edge system from Microsoft’s Bill Gates and Google’s Sundar Pichai. Earlier last month, a government panel had also recommended de-incentivising cash transactions, citing India’s cash-GDP ratio of 12% – the highest in the world. The panel sought to bring this ratio down to 6% in three years.
Use of digital wallets and payments banks has indeed surged in India. Paytm – India’s largest mobile wallet by number of users – claims it has over 150 million e-wallet users. Telecom services giant Airtel, which launched a payments bank earlier this month, already enrolled over one million customers during the pilots. Airtel said it will have a network of 250,000 banking points through its retail stores across 29 states from day one – more than the total number of ATMs in the country.