It is incredible that till only a few months ago, much of the country looked up to the Reserve Bank of India as an assured institution that would act as a safety net for people, even if economic conditions go awry due to market factors or poor government policies. But the flip-flops over demonetisation guidelines have made it a punching bag and a laughing stock.
As evident from repeated guidelines and rollbacks, the central bank was caught off guard and ill prepared when Prime Minister Narendra Modi suddenly announced demonetisation of high value notes, which accounted for over 80 per cent of the currency in circulation. The decision led to a massive cash crunch across the country. It is over 40 days now since the scheme was announced, but the cash crisis seems far from over.
To mitigate the situation, RBI has issued around 60 orders. But the bank has gone back on many of them and the public is still confused and harassed by the uncertain planning of the RBI. Several reports highlighted that the printing presses printing the new currency had only one intaglio press each and that was causing a delay in the printing process.
Furthermore, the interventions of the finance ministry into the currency demonetisation, deposit, exchange and distribution process have been worrisome. In all fairness, the job was fully the responsibility of the RBI and it should’ve been well prepared to carry it out. That hasn’t gone unnoticed and it has rightly drawn strong criticism.
At best, RBI has followed what the babus in North Block have decided and it shows the lack of authority in the central bank at the moment. New rules and rollbacks have been synonymous with the demonetisation exercise and that has severely hit the confidence and credibility it had amassed over last several decades. The only hope remains that it can pull itself together, take the bull by the horn and turn this crisis into a resolvable situation as soon as possible.