Making remonetisation less painful IRRATIONAL CHOICE
One month later, the news from the demonetisation front is dominated by two kinds of reports: One, over ~100 crore in new notes are being discovered in raids in various parts of the country and two, continuation of long queues outside banks across the country of people hoping to withdraw their own money. According to one calculation, more than ~156 crore in new currency notes have been seized so far. That is enough to satisfy 780,000 people standing in queue to get ~2,000 each or pay for 6,381 weddings at ~2.5 lakh each.
This raises two questions. How of much of cash has actually been supplied to the banks from the Reserve Bank of India (RBI)? Can the government offer us live data over websites and apps, which could also be displayed at banks? Secondly, is there a way the government can redistribute the seized currency to those standing in queues while the investigation departments and the owners of the currency continue to fight it over the legality of the ownership and seizure? Both the moves will make the government appear more responsive and eager to alleviate the pain and suffering of billions of people, instead of coming across as a bully.
The first move will directly help millions of poor people who are today in the dark about whether they would get to withdraw their money and how much will they get. Today they are complaining about making daily wasted trips, sometimes across 10-15 km only to find out that no cash is available or it is over. A real-time dissemination of data, maybe through the PM’s many apps, could let people know if they should set out for their bank and not waste days of productive time trying to get some money. Under the current system, RBI supplies cash to currency chests kept at various locations inside specific banks. From there the currency is distributed to various bank branches. It should take only a few minutes for the government to get a fix on how this is being distributed. The ministry of finance can get this data from RBI and the banks and make it public.
While the current and future data will help depositors know where the money is available, the past data would be useful too. If we know how many currency notes were supplied to each branch since early November, we would know if it was squirrelled away from the back door as as one or two banks seem to have made a habit of doing. Making the data public would also be a check not just on banks but also on RBI to put out accurate data on remonetisation. This data is available and critical for the government to track, just as deposits into Jan Dhan accounts are being collated and put up on the government website.
At the moment we are completely in the dark. It appears so far RBI has supplied ~4 lakh crore of currency notes. But we simply don’t know exactly how many new ~500 and ~2,000 notes have entered circulation. Talking to a security guard who oversees the loading of a nearby ATM of a private bank, I was told that just ~4 lakh was loaded into each ATM per day. Given the large queues in the countryside, it seems that even this is amount is not reaching branches there.
The second move — redistribution of seized cash — will not reduce the pain or suffering (the money is too little compared to the massive remonetisation effort), but at least it would give a Robin Hood image to the government. Currently seized property goes into a limbo and it takes months if not years of tortious court cases and bribery to be finally freed. Since the owners will take time to establish the bona fides of their cash, the government should distribute these currency notes after noting details. If the money is indeed genuine — that will get established months later — and the amount can be replaced through a cheque/bank transfer from the government. I am sure there are legal problems in this, but this government has not exactly cared about legal niceties on other issues, such as Aadhaar. It can also ram through enabling regulations as it has done on many issues with regard to demonetisation.
Prime Minister Narendra Modi has often argued that the government must be transparent in its functioning. Digital India, is one such programme “to transform the entire ecosystem of public services through the use of information technology” through a “digital infrastructure as a core utility to every citizen”. What does the citizen need most right now? What is the core to her existence? It is ~100 and ~500 notes. It is clearly time to apply Digital India resources to ensure some transparency to the remonetisation process. It would be many months before our currency printing presses are able to print enough of ~500 notes. Remember, with all the advance preparation, very few ~2,000 notes have been printed and given out. The government must think of ways of lessening the pain, instead of brazening it out with more rhetoric. This is because it does seem to be a long haul before a semblance of normalcy is restored.