On 30 August, the Reserve Bank of India (RBI) launched its annual report for the financial year 2016-17. Nearly eight months after the prime minister announced the demonetisation of higher-denomination notes, the Reserve Bank in its report noted that nearly 99 percent of the currency that was taken out of circulation had been returned. The report further noted that the RBI’s income for its financial year ending 30 June fell by 23.56 percent, to Rs 61,818 crore. The central bank noted that it spent Rs 7,965 crore on printing currency notes in 2016-17, more than doubling the previous year’s figure of Rs 3,420 crore. The report also pointed out that 29 billion pieces of currency were issued in an attempt to rapidly remonetise, significantly exceeding the 21.2 billion pieces of currency issued the previous year. The RBI faced severe criticism after the report’s release—several analysts suggested that the data showed that demonetisation had largely failed to deliver on the policy objectives that the government had detailed.
Shortly after the policy was announced in November 2016, D Thomas Franco, the current general secretary of the All India Bank Officers’ Confederation—a trade union representing over 2.5 lakh senior officers from rural banks in India—had demanded the resignation of the RBI governor Urjit Patel. Franco said that the demonetisation would have lasting effects on the economy, and that by approving the policy, the RBI had committed a grave error. He added that the governor should take moral responsibility for the death of 11 bank officers in the 12 days following the announcement of the scheme. On 1 September 2017, Kedar Nagarajan, a web reporter at The Caravan, spoke to D Thomas Franco to discuss Franco’s views on the report and the impact of demonetisation so far.
Kedar Nagarajan: What are your thoughts on the data contained in the RBI’s latest report?
D Thomas Franco: We had been saying from the beginning that demonetisation is not going to achieve the targets or goals that it had set. On 8 November, the prime minister set four goals that he claimed demonetisation would achieve. If I recall correctly, they were: abolition of black money, abolition of corruption, abolition of counterfeit notes and cutting funds used to sponsor terror in the country. Now it has been proved that nothing has been achieved on any of these fronts. Now that 98 percent of the currency has come back, the government has been proved wrong. The attorney general made a statement in the Supreme Court that at least Rs 4–5 lakh crore would not come back, but he was wrong. In different reports, many members and supporters of the ruling party had been making statements that a lot of money would not come, and that money would be transferred from the RBI, to the government and that that money doled out to people who have a Jan Dhan account.
But all that has been proved wrong. Terrorism has not reduced, and counterfeit currency that was collected was only to the amount of Rs 43 crores. The new notes are already in the market, and as per newspaper reports counterfeit versions of these notes have already been detected. What they had anticipated has not been achieved, and probably estimating this, they set the new goal [of demonetisation] as “digital economy.” Yes, the number of digital transactions has increased, but technology is such a thing where, if people find it comfortable, they adapt. For people to switch to the ATM card, there was no need for demonetisation—people use ATMs when they’re convenient and they are aware, except in places where the reach is less. There was no need to inflict demonetisation on the larger majority.