Ghost of demonetisation haunts govt, RBI: Chidambaram

Chidambaram said he suspected RBI had seriously miscalculated the demand for cash in the post-harvest season.

Former Finance Minister P Chidambaram on Wednesday attacked the government and the RBI over the acute cash crunch in the country and said the ghost of demonetisation has come back to haunt them.

Former Finance Minister P Chidambaram said the government cannot force the pace of digitisation or arbitrarily reduce the supply of cash. (PTI File Photo)

He also needled the government on the recent bank scams, saying people appeared to have lost confidence in banks.

“I suspect ordinary people are withdrawing cash but not putting back into the banks their surplus cash. It is possible that there is some loss of confidence in the banking system, thanks to the bank scams.

“After demonetising 500 and 1,000 rupee notes, government printed ₹2,000 notes! Now, government is complaining that ₹2,000 notes are being hoarded!! We always knew that ₹2,000 notes were printed only to help hoarders.

“The ghost of demonetisation has come back to haunt the government/RBI. Why are ATMs still bring re-calibrated even 17 months after demonetisation?” Chidambaram said in a series of tweets on the reported shortage of money in banks in some states.

“Is it correct that currency in circulation has increased by only 2.75 per cent since demonetisation? If so, I maintain that government/RBI are not allowing money supply to grow at the same rate as the nominal GDP.

“I also suspect that RBI seriously miscalculated demand for cash in the post-harvest season,” he said.

“RBI’s statement is unsatisfactory. If RBI has printed and supplied sufficient cash, it must explain why there is a cash shortage.”

The RBI on Tuesday said that there is “sufficient cash” in its vaults and currency chests and it is “taking steps to move currency to areas” which have witnessed unusually large cash withdrawals.