RBI union protests govt meddling in currency operations
14 January 2017
A united forum of officers and employees of the Reserve Bank of India (RBI) has objected to reported intervention by the government in currency operations that fall under the central bank's purview.
On 5 January, The Economic Times reported that the finance ministry had sent a joint secretary to coordinate the RBI's currency chest operations in a bid to stay on top of the demonetisation process.
In a strongly worded letter addressed to RBI governor Urjit Patel, office bearers of different unions of RBI employees said that if true, this impinges on the central bank's autonomy.
''If true, this is most unfortunate and we take strong exception to this measure of the government as impinging on RBI autonomy and its statutory as well as operational jurisdiction,'' the letter said.
The RBI has been in the midst of one of the largest currency replacement operations ever undertaken. The government's decision to withdraw Rs500 and Rs1,000 notes from circulation on 8 November pulled out 86 per cent of the currency in circulation. Since then, the regulator and the banking sector has been working to replace this currency.
Data from the central bank shows that the value of notes in circulation stood at Rs9.14 lakh crore as on 30 December. This is 52 per cent of the Rs17,54,000 crore of notes in circulation as on 28 October before the demonetisation was announced.
This seemingly slow replacement of old currency notes by the RBI has drawn criticism from many quarters.
In their letter, union representatives said it was ''painful'' to note that RBI is being criticised for its ''operational mismanagement''. This, they said, had dented the RBI's image ''beyond repair''.
''Such critics include even former RBI governors. An image of efficiency and independence that RBI assiduously built up over decades by the strenuous effort of its staff and judicious policy making has gone into smithereens in no time. We feel extremely pained,'' the unions said in the letter.
The union leaders went on to add that the finance ministry's reported decision to place its own official to coordinate currency operations shows the RBI in a poor light.
''Apart from showing RBI operations and its gigantic performance in poor light, the government now blatantly encroaches on its jurisdiction, which, we state strongly, we cannot accept,'' the unions said.
''May we request you that as the Governor of RBI, its highest functionary and protector of its autonomy and prestige, you will please do the needful urgently to do away with this unwarranted interference from the ministry of finance, and assure the staff accordingly, as the staff feel humiliated,'' the letter said.