Complete Remonetisation Within Two-Three Months, Says RBI’s Viral Acharya 

Asserting that remonetisation of the currency pulled out of the financial system during the government's cash ban is moving at a fast pace, Reserve Bank of India (RBI) Deputy Governor Viral Acharya on Monday said that the process will be completed in the next two to three months.

Acharya, however, told reporters that the level of currency in circulation will be slightly lower than that during the pre-demonetisation period. “It will be slightly lower, but it is in that ballpark,” he said.

On November 8 last year, the government banned old Rs 500 and Rs 1,000 notes in its effort to curb black money in the economy.

Acharya said the cash shortage in the economy is temporary, but there might be some spillover in the next quarter in some segments, especially for two-wheeler manufacturers.

“I'm not saying that the temporary impact is not hard on some parts of the economy, you would expect the effect to be temporary... There may be a couple of sectors, like two-wheeler sales, where there is slightly slower rebound... My sense is things are probably coming back to normal."

Speaking on the GDP numbers released by the Central Statistics Organisation (CSO) last week, Acharya said, “Our (RBI) GDP estimates were reasonably close to the CSO numbers, though the drivers could have been different. How much of the informal sector has been reflected other than because of its links with the formal sectors are interesting and worth thinking about. We have to wait for a few quarters to tell exactly where things are.”

The GDP slowed marginally to 7 percent during the October-December quarter, defying expectations of a sharper hit to economic activity due to the currency exchange program announced in November.

Also Read: As GDP Growth Outstrips Forecasts, Economists Scramble To Explain

In his first public speech on February 28 after assuming office, Acharya had suggested fresh structures through which the bad loan crisis facing the Indian banking sector could be resolved, while also calling for dramatic reforms of state-owned banks.

Gross non-performing assets across 42 listed banks in India have surged to Rs 7 lakh croreas of the end of December 2016, nearly double the amount reported at the end of the September 2015 quarter.

Acharya acknowledged that there has been little resolution of stressed assets. This is despite the fact that the RBI has put in place a number of mechanisms through which bad loans can be resolved.