Lauding the Goods and Services Tax (GST) and demonetisation initiative by the government, the Reserve Bank of India (RBI) on Thursday said these moves can transform the economy, inconvenience to public and momentary impact on growth notwithstanding. In a statement to the media on Thursday, RBI Governor Urjit Patel said withdrawal of specified bank notes will impart far reaching changes going forward, adding that demonetisation will significantly transform economy in due course. These observations were made in the Report on Trend and
Progress of Banking in India 2015-16 (RTP) and the 14th issue of the Financial Stability Report (FSR).
Patel said that enhanced transparency has helped in reinforcing the stability of India’s financial system. He further added that the performance of corporate sector has improved though the risk of lower turnover remains. The Governor also cautioned that there is “little room” for complacency and it is important to guard against sporadic volatility in financial markets. RBI further said that the banking stability indicator shows that the risks to the banking sector remained elevated due to continuous deterioration in asset quality, low profitability and liquidity.
WATCH VIDEO | Find Out What Finance Minister Arun Jaitley Said As 50-Day Demonetisation Deadline Nears
Meanwhile, in an effort to assuage concerns of Medium and Small Enterprises (MSMEs), the central bank directed banks to provide additional working capital limit to them to deal with cash crunch following demonetisation. It also noted that the financial system remains stable although banks, particularly public sector banks (PSBs) continue to face significant levels of stress.
In a recent move, the central bank also refused to entertain RTI queries on reasons behind demonetisation and notes replenishment. The RBI feels the reasons behind the sudden announcement cannot be made public. It also refused to give any details on the amount of time it will take to replenish the currency notes. “The query is in the nature of seeking future date of an event which is not defined as information as per Section 2(f) of the RTI Act,” RBI said in response to an RTI query.
The RBI did not give any reasons as to how exemption would apply in the given case as the decision was already taken and there was no way that disclosure of information would have fit in any of the reasons cited in section 8(1)(a) of the RTI Act.
(With PTI inputs)