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Working on ways to reduce online transaction cost: RBI

business Updated: Jan 21, 2017 00:22 IST
Kumar Uttam
RBI

A man walks past the Reserve Bank of India (RBI) head office in Mumbai.(Reuters File)

The RBI was working on a plan to reduce online transaction costs to encourage digital banking even as the cash situation was returning to normal, sources quoted governor Urjit Patel as saying on Friday.

The Reserve Bank of India restricted cash withdrawals as there was a “humongous demand” for cash after the government announced recall of Rs 500 and Rs 1,000 banknotes on November 8, Patel told a parliamentary panel.

“…these restrictions are temporary and being reviewed constantly,” the RBI said in a written submission.

Patel, deputy governor R Gandhi and six members of the central bank’s board appeared before the public accounts committee for a “review of the monetary policy”.

“Their submission was limited to monetary policy, with some references being made to the issue of demonetisation,” a panel member told HT.

After a long debate, the panel agreed that questions on demonetisation could be asked but only in context of the monetary policy, sources said.

The bank was well within its rights to restrict withdrawals, the limits for which were decided taking into account availability of banknotes and past patterns of withdrawal, Patel said.

Cash flow in the country was “almost normal” in urban areas and efforts were on to improve the situation in rural and remote parts of the country, sources quoted the country’s top banker as saying.

The panel also took up the government’s push for cashless transactions. The RBI was working to expand its reach in villages and framing policies to benefit the poor.

“We are working on a mechanism to bring down transaction costs,” a panel member quoted Patel as saying. “We are speaking to all stakeholders.”

The bank and Patel have come under Opposition fire for failing to provide enough cash, causing hardship to people. The Congress has even demanded Patel’s resignation for failing to uphold RBI’s autonomy and giving in to the government.

On Friday, too, PAC chief and Congress leader KV Thomas opened the meeting with a 20-minute speech on demonetisation and hardships it brought.

To a question on impact of demonetisation on growth, Patel said the move would benefit the economy in medium and long term.

Separately, in a written submission, the department of revenue told the panel that direct Tax and indirect tax collections upto December had gone up by 12.01% and 25%, respectively.

This is Patel’s second appearance before a House panel in as many days. He had on Wednesday told the finance committee that the RBI had pumped in Rs 9.1 lakh crore in new banknotes though he failed to give a figure for the banned notes deposited in banks after demonetisation.

(With agency inputs)