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Government and RBI's best kept secret? Urjit Patel answers some questions on demonetization

Reserve Bank of India (RBI) Governor Urjit Patel faced the Parliament’s Standing Committee on Finance, answering questions on demonetization, the cause, the process and its effect.

The face off with the panel came at a time when the RBI’s reputation is on stake thanks to its multitude of circulars since the de-legalisation of Rs 500 and Rs 1,000 notes. RBI has also been questioned for keeping data about currency in circulation from the public, at one instance even withdrawing data that was already public. Even Patel’s silence on the matter has been questioned with rumours that a procedure wasn’t followed before Prime Minister Narendra Modi took the drastic step to remove nearly Rs 15 lakh crore worth of currency out of the system.

Patel’s meeting with the panel was interesting to say the least, with Former Prime Minister Manmohan Singh coming to his rescue, asking that Patel be spared from grilling questions because ‘the RBI as an institution needed to be respected.’

Here are some of the key takeaway’s from Patel’s meet with the Finance Panel

– Representing the central bank were Guv Patel, Depury Governors R Gandhi and S S Mundra.

– The Parliament’s Standing Committee on Finance was chaired by former Union Minister Veerapa Moily.

– From the Finance Ministry, Economic Affairs Secretary Shaktikanta Das, Financial services Secretary Anjuly Chib Duggal and Revenue Secretary Hasmukh Adhia were present.

– Bankers present included ICICI Bank head Chanda Kochhar and Punjab National Bank’s Usha Ananthasubramanian.

– The meeting was called to discuss the issue of demonetization that had left the countrymen with a severe cash crisis and cash withdrawal caps since November 8.

– While the rumour was that the government had approached the RBI Board at the last minute before for its approval on demonetization, Patel said that the government and the central bank had been engaging in a dialogue about it since January 2016.

– Patel however said that no minutes of the meetings held were maintained to ensure secrecy of the operation.

– A government official said that the RBI could produce travel bills and documents in front of the panel to show that the government and the apex bank were in consultation since Jan 2016.

– Patel told the panel that Rs 9.2 lakh crore has come back into the system after the note ban.

– While the finance ministry officials and RBI officials were asked several questions, according to PTI, all of them were not answered. A report by PTI said the questions pertained to who’s idea it was to demonetize high-denomination notes, the autonomy of the RBI, why goal posts were shifted from black money, counterfeit currency and terrorism to digital payments.

– Patel and RBI officials will be summoned again at a later date to get more answers.

– Patel is expected to face the Public Accounts Committee of the Parliament on January 20.

With agency inputs.