Business Today: New Delhi: Wednesday,
March 29, 2017.
Even 12 days
before India withdrew the legal tender status of its Rs 500 and Rs 1,000 notes
for nearly every transaction, the country's currency printing presses were
churning out old Rs 500 notes. The final stage of production of Rs 1,000 notes,
however, ended three months ago.
In a response
to a query under the Right to Information Act, 2005, Bharatiya Reserve Bank
Note Mudran (P) Ltd, a wholly owned subsidiary of the Reserve Bank of India
(RBI), informed that the last-stage production of Rs 500 note was on October
27, 2016.
On November
8, 2016, the Narendra Modi government and the RBI announced they had
demonetised 86 per cent of the Indian currency in circulation, scrapping
high-value Rs 500 and Rs 1,000 notes.
Questions
over the readiness of the government and the RBI to handle the challenges post
the high-value currency demonetisation have been arising from several quarters,
including the parliamentary panels, although the government has not, so far,
given the details of the planning that went behind the decision.
The RTI
response hints while the government could have been contemplating the move for
some time, the final decision came at a short notice.
The official
position of the RBI is that its board had recommended the demonetisation move
in a meeting held in New Delhi a couple of hours before the announcement.
Incidentally,
in a notification on May 5, 2016, the RBI introduced an incentive scheme for
the banks to encourage installation of ATMs dispensing lower-denomination notes
(not bigger than Rs 100). The RBI promised to reimburse 50 per cent of the
actual cost of the machine or Rs 200,000 (whichever is lower) for each such
installation in urban areas. In rural areas, the amount was 60 per cent or Rs
2,50,000.
However, the
scheme had few takers, which prompted the RBI to come out with another
notification on November 2, just six days before the note ban. The directive
had wanted banks to recalibrate 10 per cent of their ATM networks to dispense
only Rs 100 notes and that, too, within a period of 15 days.
The
directives also point to the last-minute attempts made by the government to
ease the problems that were anticipated after the demonetisation announcement.
In a written
reply to a question in Rajya Sabha in February 2017, Arjun Ram Meghwal,
Minister of State, Ministry of Finance, stated that the matter to demonetise
currency was under discussion (in consultation with the RBI) for several months
preceding November 8, 2016.
He explained
that the government, in a letter dated November 7, 2016, requested the RBI to
consider cancellation of legal tender character of Rs 500 and Rs 1,000
denomination with the objective to eliminate black money and to curb the
infusion and circulation of fake Indian currency notes (FICN). The central
board of the RBI, in its meeting the next day, deliberated the proposal in
detail and recommended withdrawal of the legal tender status of such notes, he
pointed out.
The reply
also specified that the currency returned to the RBI as on December 10, 2016,
amounted to Rs 12.44 lakh crore although the actual amount returned would be
known only after the data is reconciled with the physical cash balances to
eliminate counterfeit notes, accounting errors, possible double counts and so
on.
That process
is yet to be completed.
.JPG)
.JPG)
