RBI pumped in Rs9.2 trillion worth of new notes so far: report

About Rs15.4 trillion worth Rs500 and Rs1,000 notes were demonetisation from circulation after the 8 November announcement from the government

Nigam Prusty
Updated18 Jan 2017
RBI governor Urjit Patel met a parliamentary panel on finance on Wednesday to answer questions about the country’s recent move to abolish Rs500 and Rs1,000 notes. Photo: AFP
RBI governor Urjit Patel met a parliamentary panel on finance on Wednesday to answer questions about the country’s recent move to abolish Rs500 and Rs1,000 notes. Photo: AFP

New Delhi: The Reserve Bank of India has injected Rs9.2 trillion ($135.21 billion) worth of new currency notes into the banking system to help replace the notes banned in November, a parliamentary panel member quoted central bank governor Urjit Patel as saying on Wednesday.

Patel met the panel on finance to answer questions about the 8 November abolition of Rs500 and Rs1,000 notes, or 86% of the currency then in circulation, in a bid to unearth billions of dollars of unaccounted money.

About Rs15.4 trillion worth of the notes were removed from circulation.

Patel, however, failed to provide any figure for how many of the banned notes had been deposited into the banking system and he did not provide clarity on when the cash situation would become normal, according to a second member of the panel who was also present at the appearance.

Both the members spoke on the condition of anonymity as the panel’s deliberations are confidential.

The RBI governor also told the parliamentary panel that consultations between the government and the central bank on demonetisation had began in January 2016, the second panel member told Reuters.

However, the government notified the RBI it wanted specifically to scrap Rs500 and Rs1,000 notes on 8 November, a day before the RBI board formally approved the recommendation, the member said, citing a note sent to the panel by the central bank. Modi then announced the decision later on 8 November.

Also Read: Cash withdrawal and deposit rules as of 18 January

The ban sparked a severe cash crunch that has disrupted economic activity, leading to the biggest monthly fall in automobile sales in 16 years in December. The slump coincided with a contraction in services industry and manufacturing activity.

The International Monetary Fund (IMF) on Monday cut a full percentage point off India’s GDP growth forecast, to 6.6%, in the fiscal year that ends in March 2017, citing the blow to the cash-reliant economy.

The IMF also trimmed the growth outlook for the fiscal year 2017/18 to 7.2% from 7.6% estimated earlier.

On Wednesday, two top finance ministry officials also appeared before the panel to present the government’s position.

The member said the panel would summon Patel again after the upcoming parliament session. Reuters

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