Demonetisation to benefit economy: RBI Governor

Tribune News Service & PTI

New Delhi, January 20

RBI Governor Urjit Patel today told the Public Accounts Committee (PAC) of Parliament that the demonetisation exercise will benefit the economy and though there have been initial problems, the central bank is trying to overcome them.

Patel along with other senior officials of the RBI appeared before the Public Accounts Committee (PAC) for oral evidence on ‘Review of Monetary Policy’.

Sources said Patel told the committee that demonetisation will be for the betterment of the economy in the long run and though there have been initial problems, the central bank is trying to overcome them.

The RBI informed the PAC that it was working on a mechanism to bring down transaction cost on online payments. It is learnt that Patel said cash flow position has largely improved in the country. However, there were some problems in remote rural areas and members were assured that the situation would improve in the next couple of weeks.

To questions on impact of demonetisation on growth, Patel said there may be impact in the short run, but in mid and long term the move is beneficial for the economy.

Sources said members were told by RBI that a mechanism was being discussed with stakeholders, including banks and payment gateways, to bring down the cost of transactions in tandem with the government’s initiative to promote digital payments.

Members of the panel asked several questions on demonetisation from the RBI Governor, who has been given 15 days’ time to respond to the queries.

PAC Chairman KV Thomas said the Committee will call officials from the Finance Ministry for evidence on February 10. He said the RBI Governor could be called again if required after February 10.

Among the questions on demonetisation posed to the RBI Governor included who initiated demonetisation, how much money has come back to the banks, the problems being faced by NRIs in returning the scrapped Rs 500 and 1,000 notes and the problems being faced with Nepal on the currency issue, and on these issues, sources said the RBI Governor sought time.

The sources said the RBI Governor did not give reply to many questions on the demonetisation. The sources pointed out that on demonetisation, the RBI Governor had already given replies in writing to 200 questions posed by the PAC members.