Pieces of old fake 1000 rupee notes lay on the street during a protest, organised by the Congress party, to mark a year since demonetisation was implemented by Prime Minister Narendra Modi.(REUTERS)
Pieces of old fake 1000 rupee notes lay on the street during a protest, organised by the Congress party, to mark a year since demonetisation was implemented by Prime Minister Narendra Modi.(REUTERS)

With 99.3% cash returned, RBI verdict proves demonetisation was a farce | Opinion

When you freeze agriculture and small businesses with a liquidity shock, put people through unnecessary hardship, disrupt supply chains, and destroy demand for everything, the end result can’t be such a gigantic anticlimax: Rs 107 billion($1.5 billion) weeded out from a $2.5 trillion economy.
By Andy Mukherjee | Bloomberg
UPDATED ON AUG 30, 2018 02:59 PM IST

In the chaotic final months of 2016, angry citizens were slamming the Reserve Bank of India by calling it the “Reverse Bank.” It’s taken Governor Urjit Patel, who had only recently stepped into the top job, almost two years to reassert his authority and re-establish the institution’s credibility with a couple of notable successes just this week.

Ridicule flew thick and fast after Narendra Modi’s November 2016 demonetization, for which Patel was a reluctant point man. The decision to outlaw 86 percent of the country’s cash was political, but the responsibility for taking back the suddenly worthless notes and issuing a rationed trickle of new ones to snaking, impatient queues at teller counters and ATMs fell to the central bank. The RBI issued guidelines; scrapped them; made new ones, only to roll them back again. The opposition Congress Party accused it of changing the rules around withdrawals and deposits 126 times in 43 days. Hence the unflattering moniker: the Reverse Bank of India.

Even before the cash crunch could ease, supporters of demonetization started extolling the virtues of cancelled currency. Since one of the stated goals of the exercise was to immobilize “black money” – wealth gotten illegally or by avoiding taxes – people wanted the RBI to reveal the exact amount returned. When Patel told a parliamentary panel last July that the central bank was still counting the old notes, he became the butt of social-media jokes and memes.

Finally, on Wednesday, the RBI governor stopped counting – and began his own reckoning. The central bank’s annual report showed that 99.3 percent of the banknotes were returned. Prime Minister Narendra Modi’s government is even now trying to put on a brave face. But when you freeze agriculture and small businesses with a liquidity shock, put people through unnecessary hardship, disrupt supply chains, and destroy demand for everything from autos to property, the end result can’t be such a gigantic anticlimax: Rs 107 billion ($1.5 billion) weeded out from a $2.5 trillion economy.

By coming clean about the doomed experiment, Patel has put an end to dangerous talk that the central bank would give the government a $45 billion fiscal bounty by reneging on its debt to holders of banknotes. The annual report still counts the unreturned $1.5 billion as a miscellaneous liability. The central bank is thus drawing a line between its promise to pay the par value on its liabilities, and the actions of the government, which has made it a punishable offence to hold the banned notes. Even at a press conference just a month after the note ban, when Patel faced the embarrassment of defending a monetary upheaval that wasn’t of his making, he flatly refused to manufacture a special dividend for the government just because the outlawed banknotes had stopped being legal tender.

A damning, conclusive verdict on demonetization hasn’t been Patel’s only assertion of independence this week. In a victory for the RBI’s February order to banks, asking them to either restructure their nonperforming assets by Aug. 27 or take borrowers to insolvency tribunals, a court has refused to give stranded power projects a reprieve from bankruptcy.

If the Modi government doesn’t want electricity producers to sell assets for scrap value in liquidation, it will have to direct the RBI to change its order using emergency powers. New Delhi will think twice before contradicting Patel’s uncompromising stance for two reasons. One, the opposition parties, gearing up for next year’s general elections, would pounce on it for shielding industrialists. Two, overriding Patel would only prove his point that the RBI isn’t allowed to wield the regulatory stick over state-run lenders, which are sitting on 90 percent of nonperforming assets.

However, now that he’s found his fighting spirit, Patel needs to direct some of it at India’s powerful private-sector bankers, too. There’s no running away from the fact that one of the RBI’s biggest failures has been its inability to get to the bottom of the conflict-of-interest allegations against ICICI Bank Ltd. CEO Chanda Kochhar, who’s now gone on leave pending an external probe. The U.S. Securities Exchange Commission seems to be taking whistle-blower complaints against the bank more seriously than the RBI.

Still, it’s not all kid gloves. Shareholders of Yes Bank Ltd., for instance, are a tad nervous. The bank’s long-time CEO Rana Kapoor, whom they rewarded with another three-year term in June, is yet to get the central bank’s blessing. The deadline is this week. Among peers, Yes has the highest proportion of disputed bad debts, as measured by the divergence between what the lender discloses in financial results and what’s revealed later by asset-quality reviews by the central bank.

If the RBI’s tough stance against another term for rival Axis Bank Ltd.’s CEO is anything to go by, it’s time to retire the jokes about Patel counting notes, and pay more attention to his bank clean-up drive. Bloomberg Opinion

SHARE THIS ARTICLE ON
Close
There have been major state-level differences in the burden and mortality from Covid-19. Deploy vaccines accordingly and prioritise affected areas (Sanjeev Verma/HT PHOTO)
There have been major state-level differences in the burden and mortality from Covid-19. Deploy vaccines accordingly and prioritise affected areas (Sanjeev Verma/HT PHOTO)

Refine the Covid-19 vaccination strategy

By Rajinder Dhamija
PUBLISHED ON MAR 03, 2021 08:14 PM IST
Research has shown that the pandemic has disproportionately affected regions witha high per capita income and a high burden of NCDs
Close
Having women leaders leads to improved provision of public goods and focus on education and health (Shutterstock)
Having women leaders leads to improved provision of public goods and focus on education and health (Shutterstock)

Where are India’s women leaders?

By Soumya Kapoor Mehta and Steven Walker
PUBLISHED ON MAR 03, 2021 07:53 PM IST
Women are less involved when it comes to participation in campaigns and contacts with public officials. Women candidates also have less education and experience, on average, compared to male candidates. There are also different societal expectations from political leaders of different genders
Close
Japan’s prime minister Yoshihide Suga, announced a minister of loneliness to his cabinet last month, closely following a similar announcement in January 2018 by the United Kingdom (UK). Loneliness is rarely acknowledged, deeply misunderstood, and alongside anxiety and depression, presents a massive opportunity for rectification as India copes with Covid-19 and beyond. (Getty Images/iStockphoto)
Japan’s prime minister Yoshihide Suga, announced a minister of loneliness to his cabinet last month, closely following a similar announcement in January 2018 by the United Kingdom (UK). Loneliness is rarely acknowledged, deeply misunderstood, and alongside anxiety and depression, presents a massive opportunity for rectification as India copes with Covid-19 and beyond. (Getty Images/iStockphoto)

There is a looming epidemic — of loneliness. Take it seriously

By Saumyajit Roy
PUBLISHED ON MAR 03, 2021 07:19 PM IST
India has a real opportunity to showcase solutions to a global audience towards using the best of tech and expertise in reducing loneliness. While a dedicated ministry for loneliness may just be the impetus, all we need is to look for are basic ways and means to help people who are on the brink of feeling lonely.
Close
India ranks very low in the list of well-administered nations and rank high amongst corrupt nations. despite several efforts to overhaul the administrative processes(HT Photo)
India ranks very low in the list of well-administered nations and rank high amongst corrupt nations. despite several efforts to overhaul the administrative processes(HT Photo)

Scratching the surface hasn’ helped. It is time to strike at the core issues

By VS Pandey, New Delhi
UPDATED ON MAR 03, 2021 03:02 PM IST
  • India's administrative structure led by All India Services such as the Indian Administrative Service (IAS) and the Indian Police Service (IPS) adopted an approach of 5% vs 95%.
Close
While there may be a temporary easing of military tension, there has been criticism in China of the disengagement. China could well attempt another military adventure in its bid to frustrate India’s rise (AFP)
While there may be a temporary easing of military tension, there has been criticism in China of the disengagement. China could well attempt another military adventure in its bid to frustrate India’s rise (AFP)

Disengagement will not lead to friendship

By Jayadeva Ranade
UPDATED ON MAR 03, 2021 04:07 PM IST
Notwithstanding the recent exchanges between the Indian and Chinese foreign ministers and military commanders at the border, India-China relations remain at a critical stage
Close
Muslims have been the most educationally backward group in India. In comparison to their population, they have the lowest enrolment rates at elementary, high school and higher secondary school education, as well as higher education (Raj K Raj/ Hindustan Times)
Muslims have been the most educationally backward group in India. In comparison to their population, they have the lowest enrolment rates at elementary, high school and higher secondary school education, as well as higher education (Raj K Raj/ Hindustan Times)

Provide data on the education of Muslims

By John Kurrien
PUBLISHED ON MAR 02, 2021 06:55 PM IST
Monitoring the educational progress of Muslims was hamstrung by the absence of official data, leading to their downward spiral that went unnoticed for decades
Close
Technology, communications, and data play to our strengths. These are the areas redefining every industry and we have the technology talent; our standards will be closer to the US, and we have continental-size data. (REUTERS)
Technology, communications, and data play to our strengths. These are the areas redefining every industry and we have the technology talent; our standards will be closer to the US, and we have continental-size data. (REUTERS)

The India-US tech partnership decade

By Janmejaya Sinha
UPDATED ON MAR 01, 2021 07:30 PM IST
US support enabled China’s high-growth trajectory. But the rift between the two offers India an opportunity
Close
The Panchamasali Lingayat community is one of the largest sub-sect within the Lingayat community.(ANI/Twitter)
The Panchamasali Lingayat community is one of the largest sub-sect within the Lingayat community.(ANI/Twitter)

Who is stirring the caste cauldron in Karnataka?

By Venkatesha Babu, Bengaluru
UPDATED ON MAR 01, 2021 07:08 PM IST
  • The Karnataka government has blamed the opposition for fishing in troubled waters by trying to take political advantage of the agitations but Yediyurappa may have to look within.
Close
Protesters take cover as they clash with riot police officers during a protest against the military coup in Yangon, Myanmar, February 28, 2021 (REUTERS)
Protesters take cover as they clash with riot police officers during a protest against the military coup in Yangon, Myanmar, February 28, 2021 (REUTERS)

As Myanmar turns violent, India can adopt a two-track approach

By Rajiv Bhatia
PUBLISHED ON MAR 01, 2021 06:30 PM IST
The government, in principle, supports democracy everywhere, but is also committed to non-interference in the internal affairs of others. It strives to ensure that instability in Myanmar does not trigger support for insurgency in the Northeast. India’s development cooperation projects in Myanmar should not be delayed
Close
Some saw it a justifiable tribute to the man who is a Gujarati icon, has contributed immensely to Ahmedabad’s infrastructure and also headed the state’s cricket administration (AFP)
Some saw it a justifiable tribute to the man who is a Gujarati icon, has contributed immensely to Ahmedabad’s infrastructure and also headed the state’s cricket administration (AFP)

The politics of naming and renaming public spaces in India

By Ronojoy Sen
UPDATED ON MAR 01, 2021 06:22 AM IST
Modi is the first Indian prime minister in office to get a stadium, or any other public place for that matter, named after themselves. If one looks for examples outside India, he is not in great company either
Close
The CM is wooing women by providing maternity child care leave and instituting schemes in educational institutions (Samir Jana / Hindustan Times)
The CM is wooing women by providing maternity child care leave and instituting schemes in educational institutions (Samir Jana / Hindustan Times)

When women shape political outcomes

By Shashi Shekhar
UPDATED ON MAR 01, 2021 06:21 AM IST
There are around 35 million women voters in Bengal who will play a significant role in this election. Chief minister Mamata Banerjee, who has been in power for the last 10 years, is aware of the power of women voters
Close
PM Modi’s first foray at peace-making with Pakistan had been directed at its civilian leadership. That completely miffed the generals. The situation is different this time, with a military-to-military statement (PIB)
PM Modi’s first foray at peace-making with Pakistan had been directed at its civilian leadership. That completely miffed the generals. The situation is different this time, with a military-to-military statement (PIB)

The difficult path to Indo-Pak peace

By Vivek Katju
UPDATED ON MAR 01, 2021 06:21 AM IST
Pakistan’s army is on board with the ceasefire. But unless it revises its position on terror and Kashmir, talks will hit a barrier
Close
Over the past year, the federal structure has come under strain. A BJP win in Bengal and presence in government in Tamil Nadu will strengthen the Centre’s hand — while a TMC win in Bengal and a DMK win in Tamil Nadu will strengthen the voice of states (SANTOSH KUMAR/HTPHOTO)
Over the past year, the federal structure has come under strain. A BJP win in Bengal and presence in government in Tamil Nadu will strengthen the Centre’s hand — while a TMC win in Bengal and a DMK win in Tamil Nadu will strengthen the voice of states (SANTOSH KUMAR/HTPHOTO)

The 2021 elections will shape politics for years

UPDATED ON FEB 27, 2021 08:56 PM IST
The polls will shape the trajectory of national politics, determine the balance of power between the Centre and states, and reveal the current strength of national and regional forces
Close
Disha Ravi has now been granted bail. However, in his judgment granting bail, Judge Dhamender Rana said, “The offence of sedition cannot be involved to minister to the wounded vanity of governments.” The government must heed this warning. (REUTERS)
Disha Ravi has now been granted bail. However, in his judgment granting bail, Judge Dhamender Rana said, “The offence of sedition cannot be involved to minister to the wounded vanity of governments.” The government must heed this warning. (REUTERS)

Securing India’s international image

By Mark Tully
PUBLISHED ON FEB 27, 2021 08:09 PM IST
India is described as a flawed democracy in the Economist Intelligence Unit’s Democracy Index. It has slipped from 27 in the rankings in 2014 to 53 in 2020. But does the government care about this slippage or indeed should it care? Three recent events make me wonder.
Close
Ghazala Wahab, the author of Born a Muslim: Some Truths about Islam in India , believes there are external and internal forces that hold ‘Muslims in a pincer grip’. (REUTERS)
Ghazala Wahab, the author of Born a Muslim: Some Truths about Islam in India , believes there are external and internal forces that hold ‘Muslims in a pincer grip’. (REUTERS)

It’s not easy being a Muslim in India

UPDATED ON FEB 27, 2021 07:14 PM IST
Moderate Muslims are not just caught between two worlds but torn apart. “On the one hand, conservative or devout Muslims disparage them; on the other hand, Hindus suspect them”. So what choice do they have but to “keep their heads down and hope they won’t be called upon to take a stand?”
Close
SHARE
Story Saved
OPEN APP