Category : Demonetisation / Remonetisation
RBI yesterday rolled back draconian changes introduced earlier, where
people who wanted to deposit old notes would have to convince two bank
officials that there was a satisfactory reason for depositing their
money. The move is welcome. But let this be the last notification issued
by it before the deadline for deposits ends on December 30.
Repeated chopping and changing of rules have left not just customers
but even bankers in a state of confusion. Such confusion, coupled with
the glacial pace of remonetisation, has led to a wide gulf between
official pronouncements and ground reality. An unfortunate fallout of
the demonetisation exercise is that it has eroded belief in the promises
of government as well as in the competence of RBI. For instance, Prime
Minister Narendra Modi's initial speech announcing demonetisation
promised that daily limit for exchange of old notes would be enhanced
from November 25. Instead, RBI banned exchange of old notes from that
date.
In the
interim, finance minister Arun Jaitley advised people to delay their
visits to banks to avoid queues from building up, but subsequent changes
requiring an inquisition of customers depositing money later in the
permitted cycle showed that arms of state managing demonetisation were
not on the same page. The finance ministry has been publicly doubted
RBI's statistics on returned notes. Flip flops and poor coordination
have been accompanied by packages to promote a shift away from cash. A
transition to a less-cash economy will be a change for the better-policy
measures to incentivise this transition will hasten the process. But
the package of measures announced so far suggest that they were done in a
hurry to meet secondary objectives of demonetisation.
At this juncture, it is best for government and RBI to allow
remonetisation to proceed without further changes. The focus now should
be on getting adequate currency into the banking system, to restore
normalcy to the economy that has been affected by the shock therapy of
withdrawing 86% of currency in circulation. The forthcoming budget
provides an opportunity to undo some of the damage and also shift the
focus to long-term economic reforms. It is important to restore
confidence in the economy. This can only come about through carefully
crafted and premeditated strategies. The government must avoid acting on
impulse, without thinking through the consequences of its actions.
( Editorial - The Times of India, Madurai, Thursday, December 22, 2016 )
Courtesy : MPS
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