Banks should supply 40% notes of Rs 500 or less to rural areas: RBI

Banks should supply 40% notes of Rs 500 or less to rural areas: RBI: Distribution can be worked out by checking district level current and savings account data...

Delayed corrective measures

This refers to the report “Supply 40% notes to villages: RBI to banks” (Business Standard, January 4). Though this is not the time for blame-game, the January 3 instructions from RBI can be interpreted as a tacit admission that in the whole process of implementation of demonetization of Rs500 and Rs 1000 notes, government and banking system (including the regulator) missed a couple of steps they could have taken much earlier to  November 8, 2016, the date on which the demonetization was announced, had the system applied its mind.

These steps related to readying at least majority of ATMs for dispensing the new design high denomination notes, print order for which had been given long back and stocking low denomination currency in semi-urban and rural areas where people were still using more hard cash than ATMs or electronic payment systems for their day to day money transactions. In hindsight, this could have been managed without affecting the ‘secrecy’ needed to be maintained while making the announcement. The restatement is in the context of undue delay on the part of RBI in resolving ground level issues that cropped up especially in semi-urban and rural areas, post-November 8 announcement.

Till recently, banking did not make its physical presence in India, much beyond ‘walkable’ distance from points where a four-wheeler can reach. It didn’t make much difference when ATMs took over the work of cash dispensation from banks, as ATMs crowded cities and towns and Public Sector Banks which were forced to go  to rural areas and open branches or service rural clientele too, went by and large by the ‘walkable’ distance rule. Those who are responsible for this state of affairs are enjoying the fun of being in the opposition now. The imported concepts of Banking Correspondents is yet to take roots in India.

A word of caution about new gadgets and systems for money transfer. Even if it results in some delay, new instruments and systems should be tested for universal acceptability and compatibility with the technology and gadgets already in use. The successive changes in instruments and procedures can affect public trust, besides the cost aspect which will cause frustration in the minds of clientele.

One possible reason for the chaotic position is outsourcing of work by institutions in piece-meal to agencies which have no moral allegiance to the institutions which hire them. We need to invent new strategies to build up reliable relationships between masters and servants, in the modern era of hiring and firing at higher levels and contract/bonded labour at lower levels.
M G Warrier, Mumbai


S.K.Gupta said…
Respected Sir,

Hats off to you for your brilliant piece highlighting the extant situation post demonetisation era. You have truly hit the nail on the head while identifying some key basic issues that have led the situation to come to such a pass. But, in any case, the damage has already been done by a visible mismatch between the demand and supply of new notes of all the denominations. Further, it may also take much longer to 'normalise' the situation in the entire banking sector.



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