For the first time since the RBI-Centre tussle, RBI Governor Urjit Patel on Tuesday appeared before the Standing Committee on Finance, of which former prime minister Manmohan Singh is a member, and said the impact of demonetisation was transient and the economy was robust.
This is probably the first time when an RBI Governor has been called by a panel thrice on the same issue. Prior to this, Patel shared details related to demonetisation with the panel in June and July last year. The governor also told the 31-member parliamentary panel, headed by Congress leader Veerappa Moily, that the economy would get a boost from oil prices cooling off from four-year highs.
Members were also informed that credit growth was 15 per cent, inflation has come down to 4 per cent and cash to GDP ratio also improved. Patel said he would give written responses on some of the controversial issues raised by the members, including reports that the government had initiated steps towards invoking its powers under Section 7 of the RBI Act. It is a provision under which the government can give directions to the RBI to take certain actions “in the public interest”.
“He stayed clear of controversial questions like government invoking special powers, instead he gave intelligent replies without saying anything,” they said. PTI quoted sources as saying that the governor was asked to file written replies in 10-15 days.
The meeting comes nearly three months after the RBI, in its annual report for 2017-18, said about 99.3 per cent of the Rs 500 and Rs 1,000 notes that were withdrawn from circulation on November 8, 2016, was returned to the system.
The meeting also comes a week after the central bank and the government reached an agreement on providing relief to small and medium firms and easing lending restrictions on some state-owned banks following a months-long cold war.
In his last appearance before the panel in June, Patel faced tough questions from a parliamentary panel on bad loans, bank frauds and cash crunch. The RBI governor had then expressed confidence of tiding over the crisis regarding non-performing assets and said steps were being taken to strengthen the banking system.