Note ban: Patel to meet finance panel on May 25

The Reserve Bank of India has said that internal disciplinary proceedings have been initiated against certain officials after finding discrepancies between the requisition slips obtained and physical cash dispensed during the exchange of the withdrawn ₹1,000 and ₹500 notes. RBI Governor Urjit Patel will appear before the parliament panel on May 25 to further explain the RBI’s position on the matter.

Answering questions from members, the RBI told the Finance Standing Committee of Parliament in a written note that if the panel informs the bank about the involvement of RBI officials in money laundering, it can offer specific response. “There was one instance in which a junior employee of the RBI was apprehended outside the RBI premises along with the functionary of a commercial bank in suspected specified bank notes transaction. Agencies are investigating this particular case,” the RBI’s note said.

When asked by a member why the Centre issued a number of notifications on the restrictions imposed on withdrawals, instead of the RBI, the RBI said the RBI Act of 1934 does not have any provision for issuance of any notification by the RBI on withdrawing legal tender or the character of the specified bank notes.

Maintaining that the RBI Act was not violated, the RBI said caps on withdrawals from bank accounts were imposed using Section 26(2) of the RBI Act and Section 35A (1) of the Banking Regulation Act. “The objective was to ensure more equitable distribution of available cash for larger public good in view of limited supply of cash,” the note added.

To another question whether the multiple circulars issued by the RBI were due to “pressure of some TV statement by somebody,” the RBI said required secrecy was to be maintained in the issue of demonetisation and it did not allow any preparatory actions beyond a point.

“The changes to instructions and relaxations made from time to time by the RBI were well-considered responses based on feedback from the ground and to address some of the inconvenience to the public while ensuring that the provisions were not misused,” the note added.

When asked whether demonetisation will help the system to curtail black money, the RBI said the government may be best placed to answer that question. A similar answer was given to a question on whether the views of the Finance Minister and the Chief Economic Advisor were taken before the Prime Minister’s announcement on November 8, 2016.

COMMENT NOW