Growth estimate

between September 16 and November 11, releasing more liquidity into the system.

Unveiling the fifth bi-monthly Monetary Policy Statement for 2016-17, the RBI sharply lowered its FY17 growth projection from 7.6 per cent to 7.1 per cent, taking into account the negative impact of demonetisation. It said demonetisation is expected to hurt growth and inflation only for a transitory period. With core inflation sticky, global crude oil prices high and signs of an increase in certain food prices (wheat, gram and sugar), the RBI believes it is prudent to “wait-and-watch” for now.

Responding to a query on whether restrictions on withdrawal of money would be reviewed, RBI Deputy Governor R Gandhi said, “Yes, it’s a continuous review. The programme as of now is up to December 30.” He said it was difficult at this point to specify the exact date for lifting curbs on the daily and weekly limits on withdrawal of cash from ATMS and bank branches.

With three weeks left for the December 30 deadline to return the scrapped currency notes, as much as 81 per cent, or Rs 11.55 crore — out of a value of Rs 14.17 lakh crore notes in circulation at the end of March 2016 — has already come back into the banking system, the RBI said.

According to RBI Governor Urjit Patel, the central bank and government-run note presses are working to full capacity and all efforts are being made to reach notes to every part of the country. In fact, during this period (from November 10 December 5), the Reserve Bank has supplied notes of various denominations worth Rs 3.81 lakh crore. On shortage of currency notes, he said, “In the coming days, as supplies reach the banks, some of these concerns will be alleviated.”

On lower denomination notes of Rs 100, Rs 50, Rs 20 and Rs 10, the Reserve Bank, over its counters and through bank branches all over the country, has supplied 19.1 billion pieces of denominations in this period — Rs 100 — 8.5 billion; Rs 50 — 1.8 billion; Rs 20 — 3.1 billion; and, Rs 10 — 5.7 billion notes. “This is more than what the Reserve Bank had supplied to the public in the whole of last three years,” Gandhi said.

Asked about reasons for the demonetisation, Patel said the motivation for the decision was to deal with the problem of high quality counterfeit notes in these denominations and unearth black money held in cash. The decision, he said, had not been taken in haste but after detailed deliberations.

“There had to be a high level of secrecy surrounding this decision and the fact is that such a large country was indeed taken by surprise when the decision was announced,” he said.

On problems being faced by the people due to cash shortage, Patel said, “The Reserve Bank and the central government were conscious of certain immediate difficulties that the public at large could face and all efforts were made to minimise them and mitigate them.”

Gandhi said demonetisation was announced after a detailed assessment.

Patel said demonetisation would not have any automatic impact on the RBI’S balance sheet. “Actually, the withdrawal of legal tender characteristics status does not extinguish any of RBI’S balance sheet. Therefore, there is no implication on the balance sheet as of now. The question of a special dividend automatically does not arise as of now. Not just by the withdrawal of legal tender character. No,” he said.