RBI Unions Write To Urjit Patel; Object To Government Intervention In Currency Operations

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 January 5, 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 Reserve Bank’s autonomy.

The RBI has been in the midst of one of the largest currency replacement operations ever undertaken. The government’s decision to withdraw Rs 500 and Rs 1000 notes from circulation on November 8 pulled out 86 percent 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 Rs 9.14 lakh crore as on December 30. This is 52 percent of the Rs 17.54 lakh crore in notes in circulation as on October 28 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 criticized 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 their 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.