Explain demonetisation, your role, flip-flops, secrecy: Parliament panel to RBI Governor Urjit Patel

Indian Express, January 09, 2017

Urjit Patel to appear before PAC on January 28, list of 10 questions sent

THE PUBLIC Accounts Committee (PAC) headed by senior Congress leader K V Thomas, which has asked Reserve Bank of India (RBI) Governor Urjit Patel to appear before it on January 28, has asked him 10 probing questions on the demonetisation issue — from the decision-making process to the level of RBI’s involvement, impact on the economy, and “flip-flops” in RBI regulations over the last two months.

In the questionnaire sent on December 30, accessed by The Sunday Express, the parliamentary panel has asked the RBI Governor why he should not be prosecuted and removed for “abuse of power of office” if there are no laws that impose restrictions on withdrawal of cash. The PAC has also sought to know how much of the currency was demonetised, and how much has returned into the banking system.

The list of questions:

Q.Union Minister Piyush Goyal has said on the floor of the House that the decision to demonetise was taken by the RBI and its Board. The government merely acted upon this advice. Do you concur?

Q. If the decision was indeed RBI’s, then when exactly did the RBI decide that it was in India’s best interests to demonetise currency?
Q. What was the exact rationale laid out by the RBI for this decision to invalidate Rs 500 and Rs 1,000 notes overnight?

Q. RBI’s own estimates show fake/ counterfeit currency to be a mere Rs 500 crore. India’s cash to GDP was 12%, lower than Japan (18%) and Switzerland (13%). High denomination notes as a share of currency was 86% in India, but 90% in China and 81% in US. So, what was so alarming that the RBI decided India needed to demonetise suddenly?

Q. When was the notice sent to the RBI Board members calling for an emergency meeting on November 8? Which of them attended this meeting? How long the meeting did last? And where are the minutes of this meeting?

Q. In the subsequent note sent to the Cabinet recommending demonetisation, did the RBI explicitly mention that this decision would mean invalidating 86 per cent of the country’s currency and its attendant cost? How long did the RBI say it would take to remonetise?

Q. The RBI notification of November 8, 2016 under Section 3 c(v) issued a restriction on withdrawal from a bank account over the counter to Rs 10,000 per day and Rs 20,000 per week. There was a similar limit of Rs 2,000 per day in an ATM. Under what law and powers of the RBI, were these limitations imposed on people to withdraw their own cash? What gave the powers to the RBI to ration currency notes in the country? If there are no laws that you can cite, why should you not be prosecuted and removed for abuse of power of office?

Q. Why have there been so many flip-flops in RBI regulations over the past two months? Please give us the name of the RBI officer who came up with the idea to ink people for withdrawal? Who drafted the notification on marriage related withdrawal? If it was not the RBI that drafted these but the government, is the RBI now a department of Ministry of Finance?

Q. How much exactly was demonetised and how much has been deposited back in old currency? What was the expectation of notes to be extinguished when the RBI advised the government to demonetise on November 8?

Q. Why has the RBI refused to reveal information under the RTI, citing inane reasons such as fear of personal injury? Why is the RBI not providing information under RTI to queries that come?
On Friday, the Rajya Sabha Standing Committee on Subordinate Legislation also questioned Patel as well as RBI Deputy Governors N S Vishwanathan and R Gandhi on demonetisation. According to sources, JD(U) member Ali Anwar Ansari asked if RBI was informed in advance about the demonetisation decision. Stating that not taking steps to avoid inconvenience to people amounted to “criminal negligence”, he said it was all the more dangerous if RBI was not consulted in time.

“We raised issues about demonetisation and how they coped with it… the impact, problems in implementation, problems faced by the banking sector and how to fix all that… Many questions did not get addressed,” said a source who attended the meeting.
“The members also asked how the demonetisation decision was taken on November 8. It was a constructive dialogue… We asked probing questions,” said a member of the panel.

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