RBI governor Urjit Patel will make yet another appearance before a parliamentary panel on finance on Tuesday where he will have to explain and field queries about demonetisation and its perceived intended benefits. Since 99.3 per cent of the demonetised currencies have returned to the central bank, he might also have to opine if the drive can be termed successful in curbing black money and formalising the economy.
Patel will also face questions on his home turf, the Reserve Bank of India. The parliamentary panel led by senior Congress leader Verrappa Moily will seek his response on the central bank’s recent differences with the government over mainly two topics, that is, if governance reforms are long due at RBI and if the central bank is so over-capitalised that it needs to part reserves with the government. If so, how to decide on the quantum of this surplus, if a new and less stringent method of calculation is required.
Sources said since the governor is meeting the panel amidst these high decibel topics, it is natural that the committee members would like to hear from the governor his side of the narrative directly.
The parliament panel —which includes Manmohan Singh, a former prime minister, finance minister and RBI governor — will put pertinent questions to the governor to know the exact position of the central bank on these issues. Singh had recently said that the relations between the finance ministry and the RBI had hit a low. He has also been a strong and vocal critic of demonetisation.
The RBI had, in its annual report, said that demonetised currency amounting to Rs 15.3 lakh crore had returned to banks, which was over 99 per cent of the demonetised currency in total.
The 31-member Parliamentary Standing Committee on Finance will also take up various other issues apart from the stand-off with the government on issues like NPA status of the banks, if the surge of NPAs could be arrested following IBC resolutions and PCA restrictions aimed at checking the bad asset quality, and the state of the Indian economy in general.
The RBI governor is expected to brief the panel on the state of the economy vis-a-vis growth numbers, inflation forecast and its current range, reforms in the central bank governance that have given government and external and independent directors a greater voice on the board, PCA banks corrective measures and the results thereof, the global norms on central bank reserves sharing and of course demonetisation, one of the panel members told FC.
Patel’s version on greater role for government in the decision-making process is keenly awaited by the lawmakers, as this is likely to clash with the autonomy and freedom of RBI.
The committee has been deliberating on the demonetisation issue for almost two years after its announcement on November 8, 2016.