Urjit Patel, who is known to keep a low profile, said that RBI is working towards easing the genuine pain of citizens. The RBI Governor gave an interview for the first time since demonetization. He said that RBI is regularly monitoring the situation and working towards easing the genuine pain of citizens. RBI has clear intent to normalize the things as soon as possible.
Mr. Patel mentioned about recent decision regarding excess liquidity management. RBI announced an incremental Cash Reserve Ratio of 100% recently to suck the excess liquidity. The Governor said that the banks have huge amount of deposits due to demonetization. Incremental Cash Reserve Ratio will be reviewed after the government issues Market Stabilization Scheme bonds.
Urjit Patel also said that the situation has been monitored daily. RBI has also started printing of new notes of Rs 100 and Rs 500.
Patel supported the use of debit cards and digital wallets. He believed that the transaction cost will decline. India will “leapfrog into a less cash-use economy at par with more developed nations.”
He also said that “We are also urging banks to make a big push with PoS (Point of Sale) machines with traders so that debit card use becomes more prevalent.”
The RBI has been interacting with the banks every day. The situation is gradually easing towards normal days. The queues have become shorter. The markets have begun to operate normally. He also said that “there are no reported shortages of daily items of consumption.”
He supported the demonetization decision. Govt schemes such as Jan Dhan accounts, income tax amnesty and the GST etc. combined with this demonetization drive will bring in much needed transparency and accountability and eradicate counterfeiting.
Patel said that “People were holding high denomination notes to keep tax unaccounted for money. Some sectors like real estate were using cash to avoid tax. It also strikes at counterfeit currency and pushes businesses and people to go cashless which greatly increases convenience. Towards the last, banks have waived debit card charges”.
Patel said that “as that was a once in a lifetime event. It was very difficult to remove around 86% of the currency in circulation in one go. For withdrawal of legal tender status to be effective, complete secrecy is necessary. So it was difficult for banks as well. Obviously this has caused some dislocation. That is why we request support from all Indians for the larger cause of fighting tax evasion and the black economy.”