Reserve Bank of India governor Urjit Patel was non-committal when asked, on Wednesday, whether the entire demonetised currency would come into the banking system. He said the demonetisation does have costs in the short term, but benefits in the medium and long term with more transparency, accountability and better security to fight terrorist financing, counterfeit notes and black money.
“The costs are what we are witnessing now in terms of inconvenience we are all aware of. The benefits are in the medium and long term…We will have more transparency, in terms of fiscal and tax compliance, we will be at a better place, our public finances could improve and very important is the collateral benefit is the cost of digitisation that is taking place,” Patel said.
The fifth bi-monthly monetary policy conference that saw a status quo on policy rates, remained more focused on the impact of demonetisation of ₹500 and ₹1,000 notes.
Patel said the new currency notes have enhanced security and “it will be more difficult to forge or fake the notes”.
The RBI chief added that the cost-benefit is going to catalyse and improve transparency and accountancy.
“In terms of cost of money as more digitisation takes place, the total quantum of paper currency that we require from the base level should come down,” he told journalists.