Reserve Bank Governor Urjit Patel on Wednesday said it would not have any automatic impact on the central bank’s balance sheet, putting credence to the view of many analysts that government may not make any windfall from the demonetisation. “Actually, the withdrawal of legal tender characteristics status does not extinguish any of RBI’s balance sheet. Therefore, there is no implication on the balance sheet as of now. The question of a special dividend automatically does not arise as of now. Not just by the withdrawal of legal tender character. No,” Patel said.
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Stating that demonetisation was not done in haste, the RBI Governor said, “The decision was taken after detailed deliberations.” On the money that has come back into the system, the RBI said in a statement, “As of December 6, nearly Rs 11.5 trillion or 80 per cent of the banned Rs 14.13 trillion of the currency has come back into the system,” and promised to maintain steady supply of new currency to ease cash crunch. “The consequences that have emanated from the note ban were taken on board. That is why the planning, the process and implementation is what it was, keeping in mind high secrecy had to be maintained. The RBI and the government were conscious of certain immediate difficulties for the public at large and all efforts were made to mitigate them,” he added.
Many economists had initially predicted that at least 20 per cent of the banned notes will not get back into the system which would have led to a balance sheet write-back of almost Rs 3 trillion by the RBI and which in turn could have been transferred to the sovereign as surplus/profit. This was because the currency in circulation is recorded as liability on the balance sheet of the RBI. Patel said the problems of the common man are at “the top of the RBI radar” and all dispensations are put into the place so “that period for disruption is minimal while we recalibrate our note supply to the denomination that were not withdrawn in terms of legal tender character”.
Deputy Governor R Gandhi said between November 10 and December 5, RBI supplied banknotes of various denominations worth about Rs 4 lakh crore. “As regards lower denomination notes, RBI through its counters and bank branches have supplied 19.1 billion pieces in this period which is more than what RBI had supplied to the public in whole of last three years,” he said.