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| Edited By: Manju AB |Source: DNA |Updated: Mar 24, 2018, 05:30 AM IST
In his 37-year tenure at the Reserve Bank of India (RBI), former deputy governor R Gandhi’s biggest moment came when the government decided to demonetize the Rs 500 and Rs 1,000 notes. Daily, billions of currency notes were criss-crossing the country. Gandhi, who was the key person at RBI managing the currency, in an interview with Manju AB, spoke that the idea was discussed when Raghuram Rajan was the governor. He, however, does not reveal what Rajan’s take was as he goes on to justify the demonetization decision while refusing to concede that the credibility of the apex bank was compromised.
The idea was proposed in January 2016 by the government. First it was only an idea, the decison came much later. The RBI officials sat together with government and brainstormed on how it needs to be implemented. There were elaborate deliberations from both sides and then we reached a consensus.
Yes, he was there. He was party to the initial discussions when the idea was mooted. It is not about personal views. We knew the decision will be from the government; all we had to do was give an honest view. The date would be decided by the government. It was a long discussion at various points of time for nearly two years until the time it was announced on November 8, 2016.
Many of the changes were pre-planned and not reactionary. Of course, some issues like using the indelible ink were not pre-planned. When a serious policy decision like demonetization is taken, it is important to wait for feedback from the ground and make corrections.
Obviously, the common man is not likely to see the benefits so quickly. But demonetization has helped us in tracking black money, controlling counterfeiters and checking the terrorist financing. By compelling everyone to deposit the cash they possess, we now have made all cash accountable.
It was a joint exercise by the RBI and the government; only one party needed to speak. It is not as if our authority has been breached.
That criticism is valid. The demonetized currency was about 24 billion notes, which had to be withdrawn in two months and an equivalent value injected back. As this was 86% of the total currency in circulation, we printed the high value 2,000 denominations to replenish the value. But the complaints about lower denomination notes are not valid. For lower denomination notes, we supplied three years’ requirement in just one month. What could have happened was people were hoarding cash rather than rotating it. After the first three weeks, the situation eased and we did not get any complaints.
In our country, we have three series - 1 series, 2 series and 5 series. This means, 1 series is Rs 10, Rs 100 and Rs 1,000 while 2 series means Rs 20 and Rs 2,000 and 5 series is Rs 5, Rs 50 and Rs 500. So, the missing one is Rs 200 in the 2 series. Sometime, we need to introduce the Rs 200 note.
It is only a thought just now. Once the decision is taken, it may take six months to print.
The cash crunch now is temporary. At no point can banks keep the ATMs 100% full; it becomes very expensive. We will print as many notes as the public wants. We could even print larger number than pre-demonetization days, if there is a demand. In a year typically 16 to 17 billion pieces of currency of various denominations are printed, that is 1.2 billion pieces a month.
RBI is bound to pay the full value of the issued notes under the RBI Act. But now that the Demonetization Act has come, these denomination notes will be invalid as due notice was given to the public. It was passed as an ordinance in Parliament on December 30.
