RBI’s latest move has left Modi with egg on his face


By Sandeep Sahu

Things are assuming ridiculous proportions now. As if the average of three modifications a day to the rules for the exchange of demonetized Rs 500 and 1000 currency notes since the announcement of what was sold to the nation as a ‘surgical strike’ on black money was not enough, the Reserve Bank of India (RBI) dropped a bombshell on Monday making it clear that deposits in the banned currency in excess of Rs 5000 can be made into bank accounts only once between now and December 30. For good measure, it added that even multiple deposits of smaller amounts would invite questions if they add up to over Rs 5000. The RBI move marks a serious breach of the sacred relationship of trust between the citizen and the government, makes a significant dent in the credibility of the central bank and leaves Prime Minister Narendra Modi with egg on his face.

It is worthwhile to recall what the Prime Minister had told the nation while making the dramatic announcement on November 8 evening. “Persons holding old notes of 500 or 1,000 rupees can deposit these notes in their bank or post office accounts from 10th November till close of banking hours on 30th December 2016 without any limit (emphasis mine). Thus you will have 50 days to deposit your notes and there is no need for panic. Your money will remain yours. You need have no worry on this point.” In shifting the goal post 11 days before the end of the ‘match’, Modi has not only violated the solemn commitment he had made to the people in his broadcast to the nation, but has also brought his own credibility several notches down. From now on, people will be wary of accepting anything he says at face value.

As for the move itself, the irony could not have been starker. Even as the RBI makes it clear that a person, while making a deposit of over Rs 5, 000 in old currency, will have to explain to at least ‘two bank officials’ why he didn’t do so earlier, ‘any amount’ can be deposited in any account under the Pradhan Mantri Garib Kalyan Yojana (PMGKY). In other words, the RBI is bent on putting as many hurdles as it can in the way of the common citizen to deposit outlawed currency in his possession, it has virtually rolled out the red carpet for those actually holding black money!

Now, let us try to figure out the rationale behind the latest directive of the RBI. Quite apart from the breach of trust it involves, why on earth should a person be asked to explain why he didn’t deposit the banned currency earlier- and that too to a bank official and not tax authorities? What if the person is an arthritis patient, who had held himself back earlier because of the serpentine queues and had come out only now after the length of the queue has shortened? Or someone who was indisposed for some time? Or just plain lethargic (one wonders if that would be accepted as an explanation)? What if the two bank officials are not convinced with the explanation offered? Will his deposit be credited to his account or returned? Will the person be reported to the tax authorities and booked for possession of black money? What if one bank official is convinced but the other one is not? The RBI notification issued today does not provide answers to any of the queries raised here or the dozens more that can be thought of. Things can’t get more ridiculous than this, can they?

Just about the only reason one can think of for the RBI move is this: it is a desperate attempt by the government to ensure that at least some of the demonetized high value currency does not return to the banking system so that the government can pat itself on the back and boast that its drive against ‘black money’ had succeeded. As against its initial estimate of around Rs 3 lakh crores in old Rs 500 and 1000 currency never coming back, it now transpires that as much as Rs 13 lakh crores has already returned into the system with 10 days still left for the December 30 deadline. At this rate, it is possible that the entire Rs 15.4 lakh crores could come back to the banking system by December 30. If that indeed is the case, the government will have no place to hide and hence the move to bar deposits of over Rs 5000. If the common man loses his hard earned money and suffers in the process, then so be it!

The move is unlikely to affect the real hoarders of black money much. They would have already exchanged their old notes through means dubious or otherwise. It is the common man, who took the Prime Minister’s word on television at face value, who is bound to suffer because of the RBI’s Tughlaqesque decision.