Working to reduce transaction cost on online payments: RBI to Parliament’s Public Accounts Committee

As soon as the meeting began, Thomas, a Congress MP, made a statement on demonetisation, prompting protests from BJP members, including Bhupender Yadav, Kirit Somaiya and Nishikant Dubey. Citing the amendment in the RBI Act in 2016, they said any question asked of Patel must be in context of the central bank’s monetary policy and not outside it. “The conduct of monetary policy function by the RBI under the RBI Act is different from the action taken by the government for withdrawal of legal tender character of Rs 500 and Rs 1000 bank notes under a different provision of the Act,” Dubey said.

After a long debate, the panel agreed that questions on demonetisation can be asked but only in the context of monetary policy. The discussion then moved to the official emphasis on cashless transactions and Patel informed the panel that the RBI was working to expand its reach in villages and framing policies to benefit the poor. It is learnt that Patel said cash flow position has largely improved in the country. However, there were some problems in remote rural areas and members were assured that the situation would improve in the next couple of weeks.

To questions on impact of demonetisation on growth, Patel said there may be impact in the short run, but in mid and long term the move is beneficial for the economy. Members asked a host of questions from the RBI Governor, who has been given 15 days time to respond to the queries. Sources said members were told by RBI that a mechanism was being discussed with stakeholders, including banks and payment gateways, to bring down the cost of transactions in tandem with the government’s initiative to promote digital payments.

Later talking to reporters, Thomas said the Committee will meet again on February 10 to discuss the issues with Finance Ministry officials. He further said that the RBI Governor could be called again if required after February 10. Responding to queries by members, RBI said the discussion to demonetise old high value currency between the government and the central bank started in January 2016. During the nearly four-hour meeting, the panel asked questions regarding significant surge in deposits in several cooperative banks and asked RBI to look into the issue.

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