'Demonetisation may have cost banks Rs 3,000 cr per day'

Have written to RBI to provide bank-wise, city-wise cash distribution details

On Wednesday, the Reserve Bank of India (RBI) withdrew its previous directive that required deposits above Rs 5,000 in old currency notes be justified to two bank officers. To understand the impact of this move, Business Standard spoke to the HARVINDER SINGH, general secretary of the All India Bank Officers Confederation. 

The Reserve Bank of India (RBI) has withdrawn its previous directive that required deposits above Rs 5,000 in old currency notes to be explained to bank officers. What do you make of this?
 

A: We have been pleading before RBI and Ministry of Finance that instructions issued for general public must be always clear. What was happening was that instructions issued through electronic media or notifications were reaching banks much later than when the people at large were coming to know. There was time gap between the implementation of the instructions issued by the RBI/government because when the instructions reach banks, they would have to modify their systems so that the instructions are implemented. 

For example, one instruction came that we will permit withdrawal of 2.5 lakhs per family where there are marriages. Lot of conditionality were put. But these instructions were made viral during the mid of the day but actually these instructions were received by banks two days after. For these 2-3 days bank officers were facing a lot of problem. 

Right from the day this policy of demonetization was declared we have been pleading with the RBI and government that you consult with us. We will give you the ground level problems. We will give you suggestions for smoother implementation. But no opportunity was ever granted to us. 

When these instructions were given on 19th of December, it was a surprise for everyone – general public as well as bankers. We were in a fix. 

We were told that these currencies can deposit til December 31. The Prime Minister and the Finance minister were on record saying as much. They in fact said don’t rush because you can do it till December 31. 

Maybe government had its own compulsions for changing the notification and RBI has its own problems, I am nobody to comment on that. But we must analyse the practicability part of it. 

How you can thrust more responsibilities on bank officials which they are not supposed to undertake. As Bankers, we undertake transactions only on trust. If a customer comes and deposits money how can I question his credibility and intentions. 

During last two days we had to face a lot of difficulty. Many people questioned us saying we are bankers not police officers or tax officials to ask these questions.

Yesterday two of our officers in Muzaffarnagar were consequently drawn out of the branch and beaten on roads because they tried to implement the notification. 

What was expected from us was that two officers from a branch will record the statement of the depositor on camera which will be kept for future. And you should be satisfied by the statement. Who will decide? It will depend on individual understanding. We cannot do any policing. Where is the issue of keeping an audit trail? 

We sent a communication to the Reserve Bank of India in the morning today (Wednesday) a copy was given to the Ministry of Finance telling them clearly that this onerous responsibility cannot be entrusted on bank officers. You withdraw these instructions immediately. If you will not withdraw we are going to give a call that from tomorrow officers will totally boycott these instructions.  

I’m nobody to question policy. But I should have the power to implement and assurance from the government that I will to be questioned on future date. 

Recent data suggest that roughly Rs 5 lakh crore of Rs 2,000 notes were with RBI on November 8. Was there a problem in distributing them? Are there limits to the capacity of the banking system?

I’m not sure about how much currency was there with RBI. The entire money in small denominations was released by RBI. I know that soiled notes and non-issuable notes which were deposited by banks with RBI for destroying were once again reissued for supplying to customers. 

My state units have informed me and I understand that there was disparity in favour of private banks  while the money was being distributed.

That is a serious accusation.

I agree and I am not just saying so to you, we have sent a written communication on this to the RBI telling them that this is a charge against them and they should convince people otherwise. I don’t feel they are accountable to us but for the sake of transparency they should disclose. I have asked RBI to disclose what is the currency they have issued city-wise, bank-wise on a daily basis. That will make the position clear. If my statement is proven wrong RBI’s credibility would only increase but they have not replied. I represent 2.83 lakh officers who are running the banking system but RBI and government won’t reply to us. 

How do you see the banking sector coping in the coming months?

We have faced a lot of harassment, anger and anguish of customers without a fault. We have been representing to bank management, to IBA, government and to RBI but none have responded. Since this policy was linked with nationalism nobody could dare to speak against it. I am no body to comment on the success or failure of the policy – that is for the politicians and economists to decide. 

But as an officer in the public sector bank i was duty bound to implement the policy and we have all worked without caring for compensation or the stress caused. Personal hardships will be over soon. 

But the banking industry is going to suffer a lot. For the last 50 days, we are working on only this. New funding has been stopped. My customers have informed me that their industrial, commercial activities have been substantially reduced. They have retrenched labour. Economic activity has suffered. This will affect paying capacity of borrowers. 

Moreover we have suffered opportunity costs that are not going to be reimbursed to us. Our rough estimate is that the banking sector has borne a cost of Rs 3,000 crore every day for this demonetisation. 

Then CRR was imposed on 100% basis and AQR was implemented. The CRR was eventually done away with. Recovery in NPA accounts which had started has now slowed.