From: b sabha <[email protected]>
http://www.moneylife.in/article/demonetisation-18-hard-questions-the-parliamentary-panel-should-ask-the-rbi-governor/49514.html [http://www.moneylife.in/media/uploads/article/responsive/urjitpatel18117.jpg]<http://www.moneylife.in/article/demonetisation-18-hard-questions-the-parliamentary-panel-should-ask-the-rbi-governor/49514.html> Demonetisation: 18 Hard Questions the Parliamentary Panel Should Ask the RBI Governor<http://www.moneylife.in/article/demonetisation-18-hard-questions-the-parliamentary-panel-should-ask-the-rbi-governor/49514.html> www.moneylife.in Moneylife is an online resource for news and opinions on personal finance, banking, finance and industry sectors from India. Demonetisation: 18 Hard Questions the Parliamentary Panel Should Ask the RBI Governor Moneylife Digital Team<http://www.moneylife.in/article/demonetisation-18-hard-questions-the-parliamentary-panel-should-ask-the-rbi-governor/49514.html> 18 January 2017<http://www.moneylife.in/article/demonetisation-18-hard-questions-the-parliamentary-panel-should-ask-the-rbi-governor/49514.html#> 1 <https://www.linkedin.com/shareArticle?mini=true&title=Demonetisation:%2018%20Hard%20Questions%20the%20Parliamentary%20Panel%20Should%20Ask%20the%20RBI%20Governor&summary=&url=http://www.moneylife.in//article/demonetisation-18-hard-questions-the-parliamentary-panel-should-ask-the-rbi-governor/49514.html> [http://www.moneylife.in/media/uploads/article/responsive/urjitpatel18117.jpg] The governor of the Reserve Bank of India, Urjit Patel is supposed to appear before a parliamentary panel today, to explain the demonetisation decision and its effect on economy. He would also be quizzed about the steps the Central bank took to deal with the massive cash crunch that followed the sudden withdrawal of 500 and 1000-rupee notes, announced by Prime Minister Narendra Modi in an address to the nation on the evening of November 8. Here is a list of questions that the Parliamentary panel may like to put to Mr Patel. 1. Was there any contingency plan before withdrawing the 85% on notes? 2. When did the printing of Rs500 denomination notes start? 3. How many pieces of notes of Rs2,000 denomination were ready by 8th November 2016? 4. Was the stock of paper, ink, security features enough on that day to print new notes? 5. Please give us the paper production figures also printing figures month wise before 8th November 2016 to support the contention that you were ready with plans or to indicate you had made adequate plans 6. Were you not supposed to change the security features as well along with new designs? Who delayed them? 7. Do you even now have contracts in place for M-features, security thread, ink etc.? Or you are importing these on expired contracts? Give us the contract dates please. 8. How much have you spent on imported paper, ink, security features before and after the 8th November 2016? 9. Luckily Bank Note Paper Mill India Pvt Ltd (BNPM) has so far produced solar 6,300 tonnes of paper, but by 8th November 2016 produced 2,600 tonnes of paper for Rs2,000 denomination. What if that Mill had also failed like Hoshangabad because of some accident? Was there a plan in place? 10. Is it true that the Hoshangabad plant was supposed to produce 6,000 MT security paper in a year but by 8th November 2016 had produced only 10 tonnes for Rs500 note paper? 11. You require 28,000 MT of paper to replenish 18 billion pieces. Was enough paper imported for this purpose? By when? 12. Why have you now called for tenders for import of 27,000MT paper? 13. You have plans to consume 27,000MT imported paper plus 14,000MT manufactured by your Mysuru paper mill even if you ignore Hoshangabad. Is this correct? 14. If so, do you know that you have exhausted your reserve bank notes while the old notes which were pulled out to be incineration that you put back into circulation, will wear out in a few months? How would you print all those notes and by which time frame. Can it take as long as two years? 15. As on 8th November 2016, was the printing capacity of Bharatiya Reserve Bank Note Mudran Pvt. Ltd. (BRBNMPL), a wholly-owned subsidiary of the RBI (Salboni and Mysuru) around 40 million per day and govt presses (Nashik-Maharashtra, Dewas-Madhya Pradesh) 15 million per day? 16. How did you think replenishing even 10% of withdrawn notes within two months or 8 weeks was possible? Are all the Presses still working in two shifts to print 90 million notes per day? 17. Will the printing presses take this extra load continuously? 18. How many more months required to replenish the old notes? ============= https://scroll.in/article/827006/five-questions-the-parliamentary-panels-must-ask-rbi-governor-urjit-patel-on-demonetisation Five questions the parliamentary panels must ask RBI governor Urjit Patel on demonetisation Why do we still know so little about demonetisation? Where are the calculations? [Five questions the parliamentary panels must ask RBI governor Urjit Patel on demonetisation] If it wasn’t already clear before the Reserve Bank of India said so, it’s even more evident now that the central bank did not come up with the idea of demonetisation. Union Minister Piyush Goyal may have declared that the RBI board recommended the withdrawal of high-value notes, but it only did so after the government “advised<http://indianexpress.com/article/business/economy/demonetisation-on-november-7-it-was-govt-which-advised-rbi-to-consider-note-ban-got-rbi-nod-the-next-day-rajya-sabha-4467235/>” it to do so. So asking Urjit Patel, who appears before Parliament’s Finance Standing Committee on Wednesday, what were the reasons behind the effort may not lead anywhere. But that doesn’t absolve the central bank’s role in what was evidently a badly implemented effort that caused economic stress and even led to several deaths. More worryingly, we still have very little information about what the specific aims of the move were, and more than two months later, no sense of what it has achieved. The Opposition had a chance to put direct questions to the government and hold it accountable in the Winter Session of Parliament in December. Instead, various leaders seemed more interested in scoring points and turning it into a nationwide campaign against demonetisation that hasn’t taken off. As with most legislative processes these days, the real work seems to be happening in the various Parliamentary panels. It’s through the questioning of the Public Accounts Committee that we finally got the admission that the idea for demonetisation officially came from the government. And over the next few days, Patel will face the finance panel and the Public Accounts Committee. This means an opportunity to get more details about the massive move that somehow remains hard to pin down. 1. Where are the calculations? The government’s advice to the bank was that demonetisation would mitigate the triple problems of counterfeiting, terrorist financing and black money. But such enormous decisions do not, or should not, take place just because authorities believe something might be true. Did the RBI look at evidence or calculations, presented by the government or otherwise, that convinced them the gains of demonetisation would be more than the shock it caused to the economy? 2. What were the specific aims? The broad aim was to attack counterfeiting, terrorist financing and black money, never mind the later messages about a cashless economy. Naturally, even an effort as large as this will not end any of these problems, but the intention is that the shock should seriously bring the numbers down. * Black money: The government has already said it had no estimate of black money<https://scroll.in/latest/821931/there-is-no-official-estimate-of-the-amount-of-black-money-in-the-country-says-finance-ministry> before or after November 8. Cash has amounted to just6% of undeclared assets<http://www.hindustantimes.com/india-news/cash-has-only-6-share-in-black-money-seizures-reveals-income-tax-data/story-JfFuTiJYtxKwJQhz2ApxlL.html> the Income Tax department has found in its raids over the last few years. Does the RBI have an estimate for the amount of black money? If it doesn’t, what amount of currency declared through the government’s two amnesty schemes does it expect as an adequate indicator that demonetisation worked? * Fake notes: RBI data suggested that seven in every million notes in circulation in 2015-’16 were fake. That’s 0.0007%. But a large number of fake notes go undetected.<https://scroll.in/article/822390/only-16-of-every-250-fake-notes-were-detected-in-india-in-2015-16> The RBI can expect better detection with new notes, but they are also supposed to be more secure and harder to counterfeit. Does the RBI then believe that, after demonetisation, the number of detected fake notes in circulation will be even lower than 0.0007%? * Terror financing: Is there an estimate of how much Indian currency goes into terror financing? What does the RBI expect this to come down to? If the central bank is unable to answer these questions, it suggests that we went into the move without any data and are coming out without numbers either. It is obvious decisions at this level or not binary or zero-sum, they have to be calculated risks.<http://www.bloombergquint.com/opinion/2017/01/12/urjit-patel-the-five-year-twist> Again, where are the calculations? Without these numbers, how will we know if the move succeeded? 3. What is the cost? In time, we will learn of the economic cost of this effort, as data on how the economy performed over the last few months comes in. The RBI has already lowered its Gross Domestic Product growth rate expectation from 7.6% to 7.1%. But what of the actual cost of the currency exchange move? What did it cost to print all that currency, which some are putting at Rs 12,000 crore? What were the labour costs in turning banks over to currency exchange efforts from November 8 onward, continued till today? What is the estimated productivity lost in forcing banks to spend most of the last two months on these efforts? It’s worth looking at the quantifiable cost of the exercise, before starting to factor in the shock to the economy, which will become clearer over the next few months. 4. Is everything okay with the RBI’s functioning? When the RBI board, based on the government’s advice, recommended demonetisation it was at its smallest size in years. The RBI Act provides for 19 directors, with the suggestion that at full strength there is one more independent director than internal. On November 8, it had just 10 directors<https://www.rbi.org.in/scripts/aboutusdisplay.aspx#CB>, and only three independent ones.<https://thewire.in/89012/the-compromised-independence-of-the-rbi/> Meanwhile, reports have suggested that the printing of the Rs 2,000 note began months before November 8, and indeed the RBI has said that its offices were already receiving stock of the new notes on that day. Yet the laws require the RBI’s board to recommend the design, form and material of bank notes. However, before November 8, the RBI’s board hadn’t made any recommendations on the Rs 2,000 note. Did the government bypass it? Similarly, was there provision made for the expenditure that the RBI might have to incur as part of this move? Did the RBI board deliberate on this? These might seem like technicalities – and indeed compared to some of the larger questions of demonetisation they are – but they still suggest the RBI isn’t functioning as the law says it should, and that’s a problem. Is the governor concerned? What is being done about it? 5. Whose life is in danger? The RBI refused to answer<http://profit.ndtv.com/news/economy/article-refusing-questions-on-notes-ban-rbi-cites-threat-to-life-report-1648385> a Right to Information request, demanding details on the number of demonetised notes already in banks on the night of November 8, according to Bloomberg. The central bank did so citing a provision that allows for requests to be blocked if there is a danger to the life or physical safety of anyone who disclosed this information to the public. Whose life could possibly be in danger if they disclosed this information? We welcome your comments at [email protected].<mailto:?Subject=Five%20questions%20the%20parliamentary%20panels%20must%20ask%20RBI%20governor%20Urjit%20Patel%20on%20demonetisation&[email protected]> =============== http://indianexpress.com/article/business/economy/demonetisation-on-november-7-it-was-govt-which-advised-rbi-to-consider-note-ban-got-rbi-nod-the-next-day-rajya-sabha-4467235/ Demonetisation: On Nov 7, it was Govt which ‘advised’ RBI to ‘consider’ note ban, got RBI nod next day That’s what RBI says in 7-page note to House panel; agrees with Govt’s rationale to counter ‘FICN menace’. SO far, the Government has suggested that the decision to withdraw 500-rupee and 1,000-rupee notes came from the Reserve Bank of India. But in its submission to a Parliamentary panel late last month, the RBI, agreeing with the Government’s rationale behind the move, has made it clear that it was the Government which “advised” it to do so. “Government, on 7th November, 2016, advised the Reserve Bank that to mitigate the triple problems of counterfeiting, terrorist financing and black money, the Central Board of the Reserve Bank may consider withdrawal of the legal tender status of the notes in high denominations of Rs 500 and Rs 1,000,” said the RBI in a seven-page note submitted on December 22 to the Parliament’s Department Related Committee of Finance headed by Congress leader M Veerappa Moily. WATCH VIDEO | Who Suggested Demonetisation? Was It Government Or Reserve Bank Of India? Read | Digital Transactions: Aadhaar-enabled merchant payment system a user-friendly tool<http://indianexpress.com/article/business/economy/digital-transactions-aadhaar-enabled-merchant-payment-system-a-user-friendly-tool-4467104/> “It was advised in that letter that cash has been a facilitator of black money,” the note went on to state, “elimination of black money will eliminate the long shadow of the ghost economy and will be positive for India’s growth outlook. They also observed that in the last five years, there has been an increase in circulation of Rs 500 and Rs 1,000 notes with an increasing incidence of counterfeiting of these notes. Read | RBI stance on introduction of new series of notes: ‘A very rare opportunity to tackle fake notes, terrorist financing and black money’<http://indianexpress.com/article/business/economy/rbi-stance-on-introduction-of-new-series-of-notes-a-very-rare-opportunity-to-tackle-fake-notes-terrorist-financing-and-black-money-4467113/> There have been widespread reports of the usage of Fake Indian Currency Notes (FICN) for financing of terrorism and drug financing. The FICN have their origin in neighbouring country and pose a grievous threat to the security and integrity of the country. Hence the Government has recommended that the withdrawal of the legal tender character of these notes is apposite. GoI advised the Bank to place these matters of immediacy before the Directors of the Central Board of the Reserve Bank of India for consideration…” the note said. According to RBI’s note, accessed by The Indian Express, the RBI Central Board met the very next day to “consider the Government’s advice,” and after “deliberations,” decided to recommend to Central Government that the legal tender status of the banknotes in the high denominations of Rs 500 and Rs 1000 be withdrawn.” The Government “considered the recommendations” and decided to withdraw the notes. That same evening, Prime Minister Narendra Modi<http://indianexpress.com/about/narendra-modi> addressed the nation and announced the decision to withdraw the notes effective midnight November 8. Eight days later, during a debate on demonetisation in the Rajya Sabha, Union Minister for Power, Coal, New and Renewable Energy Piyush Goyal said that the decision to demonetise was taken by the RBI Board. “Reserve Bank ke Board ne yah nirnay liya. Isko Sarkar ke paas bheja aur sarkar ne is nirnay ki sarahna karte hue, cabinet ne ise manjoori di ki paanch sau or hazar ke purane noton ko radd kiya jaaye, naye notes aaye (The Board of Reserve Bank took this decision, sent it before the government and with the government endorsing it, Cabinet gave its nod to it to demonetise the old currency notes of Rs 500 and Rs 1000 and bring new notes),” Goyal had said. In its note, the RBI, under the heading “Background” and “Preparations,” said: “It occurred to Government of India and the Reserve Bank that the introduction of new series of notes could provide a very rare and profound opportunity to tackle all the three problems of counterfeiting, terrorist financing and black money by demonetising the banknotes in high denominations of Rs 500 and Rs 1000 or by withdrawing legal tender status of such banknotes…Though no firm decision was taken initially, whether to demonetise or not, preparations still went on for introduction of new series notes, as that was needed in any case.” The RBI recalled that as early as October 7, 2014, it had suggested to the Government the need for introduction of higher denomination notes of value Rs 5,000 and Rs 10,000, keeping in view inflation and the need for “facilitating payments and managing the currency logistics.” The Government considered the same and after deliberations, advised on May 18, 2016 their “in-principle decision” to introduce Rs 2000-notes. Accordingly, the RBI, on May 27, 2016, recommended to Government that a new series of bank notes with new designs, sizes, colours and themes including notes in the new Rs 2,000 denomination be introduced. The Government gave their final approval on June 7, 2016 and, accordingly, the presses were advised in June 2016 to initiate production of new series notes. The RBI said that when the stock of new notes printed was reaching a “critical minimum,” the decision to withdraw the legal tender could be made. However, the RBI’s own data in the note shows that as of November 8, 2016 — when the PM announced the decision — the stock of Rs 2000 notes at the RBI and currency chests was only Rs 94,660 crore, barely six per cent of the total value of Rs 15 lakh crore withdrawn with the demonetisation decision. Yet, the RBI records in its note that the proposal couldn’t have “come at a more opportune time than coinciding with the introduction of the new series of notes.” Justifying its Board’s decision to agree with the Government, the RBI note says that over the last few years, in consultation with the Government, the central bank has been working on introduction of new series of banknotes. It included improving existing security features, adding new design features to “secure our banknotes against counterfeiting.” In parallel, the note said, the Government of India had been taking several steps to curb black money and combat terrorism. The panel headed by Moily meets again on January 18 when RBI Governor Urjit Patel, representatives of the Ministry of Finance, Department of Economic Affairs, Financial Services and Revenue and representatives of Indian Banks Association (IBA), State Bank of India (SBI), Punjab National Bank (PNB) and Oriental Bank of Commerce (OBC) have been called to depose for a briefing on the subject “Demonetisation of Indian Currency notes of Rs 500 and Rs 1000 and the impact thereof”. In the note to the panel, the RBI also said that it was considered that action as proposed by Government would “result in non-availability of these denominations” for the public for transaction and store of value purposes and it “might not immediately be possible to replace these notes fully in terms of both value and volume” on one to one basis, within a specific time. The RBI, however, claimed that the stock of Rs-2000 notes were arriving in RBI offices and were being despatched to currency chests across the country and that “could enable” meeting a significant “critical portion” of the physical demand therefrom in value terms. “Besides, electronic means of transaction were expected to take another part of the transaction load hitherto met from physical currency. Further, the available stock of other denominations at RBI and currency chests would also help meet demand. Further, Rs 500 banknotes in…(New)Series was also being introduced. With these measures in place, it was considered that the transition from old series to new series in the context of withdrawal of legal tender character of Rs 500 and Rs 1000 could be managed.” ============= http://indianexpress.com/article/business/economy/cleared-rs-2000-note-in-may-no-talk-then-on-500-1000-rbi-demonetisation-rti-reply-4467228/ Cleared Rs 2000 note in May, no talk then on 500, 1000: RBI In its RTI reply to an application filed by The Indian Express, the RBI said the Central Board discussed and approved the proposal to introduce Rs 2,000 notes on May 19 last year. The Reserve Bank of India (RBI) has said that its Central Board approved the proposal to issue new notes of the denomination of Rs 2,000 as early as May 2016, a fact it mentions in its note to the Standing Committee on Finance, but adds that there was no discussion on a possible withdrawal of Rs 500 and Rs 1,000 notes at its board meetings in May or July or August. In its Right to Information (RTI) reply to an application filed by The Indian Express, the RBI said the Central Board discussed and approved the proposal to introduce Rs 2,000 notes on May 19 last year. To a specific question on whether there was a discussion on a possible withdrawal of legal tender of the Rs 500 and Rs 1,000 notes at any of the board meetings of the RBI last year, the RBI said that this was not discussed during the May 2016 Board meeting or the subsequent Board meetings on July 7 and August 11. Raghuram Rajan was Governor when the proposal to introduce new Rs 2,000 notes was approved by the RBI board in May last year. On a specific query about whether the RBI Central Board received any proposal to demonetise Rs 500 and Rs 1,000 notes from the government, the RBI said in another RTI reply, “the Central Board of Reserve Bank of India in its meeting held on November 8, 2016, recommended the proposal to withdraw legal tender character of 500 and 1000 rupee notes to the Central Government.’’ However, the RBI declined to provide the minutes of the Central Board meeting on November 8, 2016, saying that the “information sought is exempt from disclosures under 8(1)(a) of the RTI Act, 2005.” The RBI, in the RTI reply, also declined to provide any comment on whether the then Governor Raghuram Rajan had sent any letter or communication to the government against withdrawing Rs 500 notes in 2016 before his term ended in September 2016. Rajan who is back to his teaching assignment at Chicago University’s Booth School of Business did not respond to emails seeking his comments on this issue. In a speech at a public rally a week after he announced his government’s decision to pull out high value notes in mid November, Prime Minister, Narendra Modi<http://indianexpress.com/about/narendra-modi> had said that the move was ten months in the making. and secrecy had to be maintained to prevent the dishonest from converting their black money. In his address to the nation on November 8, when he first announced the decision, Modi had said that in 2014, the RBI had sent a recommendation to the government for issue of 5000 and 10,000 rupee notes. After careful consideration this was not accepted (by the government) he said. Rajan completed his three year term as RBI Governor on September 4, 2016 and Urjit Patel assumed charge as Governor the next day. According to the RTI reply to The Indian Express, Governor Urjit Patel, Deputy Governors R Gandhi, SS Mundra, Shaktikanta Das, Secretary, Dept of Economic Affairs, DFS Secretary Anjuly Chib Duggal, Bharat Doshi, Nachiket Mor and former bureaucrat, Sudhir Mankad were present at the November 8, 2016 board meeting which cleared the demonetisation of high value notes.
