The frequent flip flops in regulations on withdrawals, exchange and deposits by the Reserve Bank of India (RBI) after demonetisation are shocking. At the risk of losing people’s faith, the Central bank has changed a regulation almost once in three days since November 8.
Under attack for the December 19 regulation that put a number of restrictions on deposits over Rs 5000 in banned currency notes of Rs 500 and Rs 1000 until December 30, the RBI did a U-turn today and removed all restrictions on deposits in KYC-compliant accounts.
In the previous regulation, the RBI had said that a person can deposit more than Rs 5000 in banned notes only once until December 30. It also asked banks to ask the person depositing over Rs 5000 as to why s/he was not able to do so earlier. The regulation surprised many as the Central bank had been telling people to remain patient and exchange their old notes at their convenience anytime before December 30.
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Faith in RBI keeps the country’s economy running. However, with frequent changes in regulations, the RBI has not only shaken people’s faith in the institution but also left many of them confused.
It is apparent that today’s U-turn by the RBI was done under political pressure as Modi government was facing serious criticism over deposit restrictions from across the country.
One may argue that RBI changed regulations frequently to keep shocking the money launderers. But it cannot be forgotten that by not sticking to its own regulations, the Central bank ended frequently increasing people’s troubles due to demonetisation.
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Ever since the announcement of note ban by Prime Minister Narendra Modi on November 8, RBI chief Urjit Patel has been accused by the opposition of undermining the autonomy of the Central bank by colluding with the government. While the opposition’s claim may be argued, it is certain that RBI has exposed its incompetence in handling a situation like note ban.
Demonetisation has introduced a chaos in the country’s economy. It is still too early to conclude which sector has been hit the most. But when the dust would settle, one hopes that RBI doesn’t end up as the biggest failure of demonetisation or as someone has joked — the Reverse Bank of India.