Demonetization: Bankers threaten to go on a nationwide strike

The Reserve Bank of India and the Centre don't often see eye-to-eye, even in the best of times; which these post-demonetization days certainly aren't.

The pressure of managing the demonetization process has highlighted communication lapses between the central government and the central bank.

One such recent incident was the RBI's notification imposing restrictions of deposit of demonetized banknotes worth over Rs.5,000 after 20 Dec'16.

The lack of coordination between the Centre and the RBI has come in the way of smoother implementation of several measures post demonetization.

Though the Finance Ministry took the decision of restricting deposits of over Rs.5,000 in old notes, the government said the notification was "badly drafted."

It said especially the section mandating the explanation of reasons for delaying deposits was not well drafted.

People in RBI feel the central bank's image has been tarnished by the frequent changes in notifications - most of which are issues on the government's directions.

Global credit rating agency Standard & Poor's recently said the center's surprise move has undermined the RBI's reputation for competence and independence.

S&P's comments came as the RBI and the Centre were facing criticism for the demonetization.

The RBI revealed that the bank's central board of directors made a recommendation for demonetizing Rs.1000 and Rs.500 notes at a meeting in New Delhi on November 8.

In response to an RTI query it was revealed that the bank made the recommendation just hours before the PM's announcement.

However, both the Centre and the RBI maintain that the decision was discussed for long.

The RBI has informed the Parliament's standing committee on finance that the note ban was implemented based on recommendations from the Centre just a day in advance.

Some stated that the RBI's response was contradictory to the Centre's version of events that said the RBI recommended demonetization.

However government sources maintained that the decision was under discussion with the RBI for 3-6 months.

Employee unions of the central bank wrote to the RBI governor Urjit Patel to take action against Centre's "unwarranted interference".

The RBI employees were reacting to a report that says of a joint secretary from the finance ministry being sent to the RBI headquarters to regulate currency procedures.

They said RBI had worked efficiently and independently since 1935 and should continue like that.

Former State Bank of India chairman Pratip Chaudhuri has alleged that the RBI has been "lying on the face" to Indian citizens about the cash situation.

He said the RBI should be more transparent about the demonetization process.

Chaudhuri believes the cash situation won't become normal at least for the next three months.

He said demonetization has had a lasting impact on India's economy.

RBI governor Urjit Patel stated that new notes worth Rs.9.2 lakh crore have already been introduced in place of Rs.15.4 lakh crore worth Rs.500 and Rs.1,000 notes that were removed from circulation.

Speaking to the Parliamentary Panel on demonetization, Patel said demonetization discussions began early last year.

Patel will appear before the Public Accounts Committee of Parliament for the same issue on 20 January.

Former PM Manmohan Singh came to the aid of RBI governor Urjit Patel amidst the heated debate on demonetization, saying he is not obligated to respond to queries on lifting banking restrictions.

Singh came to Patel's defence when he was questioned by Congress MP Digvijaya Singh.

He said answering the questions would put pressure on the banking system.

Certain bank trade unions have intimidated that they would go on a nationwide, day-long strike on 7th February.

Their demands include complete removal of regulations imposed during demonetization and safeguarding RBI's autonomy.

They also want payment of overtime to employees who assisted in the 50-day period.

In other news, the RBI is yet to find out the number of notes junked during demonetization.