Lok Sabha

February 7, 2017

Saugata Roy speaks on Specified Bank Notes (Cessation of Liabilities) Bill, 2017

Saugata Roy speaks on Specified Bank Notes (Cessation of Liabilities) Bill, 2017


Sir I rise to speak on the Specified Bank Notes (Cessation of Liabilities) Bill 2017. Earlier when the Bill was introduced in Lok Sabha I had opposed the introduction and I had spoken on that. I had also given a Statutory Resolution disapproving the Ordinance but since Mr Premachandran’s name was first, he has spoken elaborately on the same. Sir, also Dr Shashi Tharoor has spoken elaborately. I am opposing the Bill in only two parts.

The legal part is that this is a Bill that will give a legal shape to the decision announced by the government on November 8, 2016, announcing demonetisation. The operative part is that on and from the appointed day notwithstanding anything contained in the RBI Act 1934, the specified banknotes that have ceased to be legal tender in view of the notification of the Ministry of Finance, etc issued under Sec26 (2) of the RBI Act, 1934. The legal liability of the Reserve Bank will seize and the guarantee of the Central Govt will seize.

The RBI Act is very clear in Section 26(1): “subject to subsection of provision 2; every bank note shall be legal tender at any place inside India in payment of or on account of the amount expressed therein and shall be guaranteed by the Central government.” This is important.

And Section 26(2): On recommendation of the Central Board the 2 [Central govern­ment] may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notifica­tion, any series of bank notes of any denomination shall cease to be legal tender 3 [save at such office or agency of the Bank and to such extent as may be specified in the notification]

And there is a Section 34 which says that liabilities of the issue department shall be an amount equal to the total amount of currency notes of government of India and bank notes for that time being circulated. S o the main question is, the government is saying because the Central government had issued a notification on the advice of the Reserve Bank that’s why the notes were cancelled and that is being legalised.

Now my question to the Finance Minister is where is it written in the RBI Act, 1934 that the Government of India will ask the RBI to hold a central board meeting? It is written that on the recommendation of the central board, the Central Government may issue a notification only when RBI Board advises it. Where is it written that the Central Government will ask the BRI Board will hold a meeting to approve the decision? That is why this whole law is ultra vires.

So actually what the Bill is doing is to withdraw the guarantee of the Central Government, besides that it is giving a grace period to those who were outside the country who could not deposit their cheques earlier and I do not know They are saying that there will be fine of Rs 10,000 for those who will hold notes above a certain number.

I do not know what is the necessity of punishing people just because they are holding some notes. In any case, they are not legal tenders anymore. And, if somebody gives a wrong declaration, the punishment is up to Rs 50,000. Why is it so severe on false declaration? Why is it so important? The Minister has not cleared this conception of ours. That is why I think the Ordinance was uncalled for. Why did the Government go through the RBI route? After receiving the RBI’s recommendations, the Government could have straightaway issued the Ordinance instead of going through this roundabout route.

Having said this, the Minister will move to pass the Bill. That raises the basic question to which – I heard intently the Prime Minister speaking in the House today – I’ve received no reply, that what was the rationale for demonetisation. Now, number one, the Government has said it is to prevent counterfeiting of notes (FCIN), it is to prevent terrorist groups from getting money. Now, as has been estimated, counterfeit notes are 0.028 per cent of the total amount in circulation, which is roughly over Rs 17 lakh crore, out of Rs 15.44 lakh crore has been demonetised. Terror money is only Rs 400 crore. So to get Rs 400 crore out of the system, to demonetise, to cancel Rs 15.44 lakh crore is absurd, ridiculous and meaningless.

Secondly, Sir, they say this is to curb black money and corruption. Now, according to all available estimates, the total amount of black money which is in the form of currency notes is 6 per cent. The people who have black money do not keep it as such. Except some small change, they convert it into either gold or jewellery or real estate or they keep it abroad. Now this government has been a singular failure in spite of enacting a law to bring back black money from abroad. The Prime Minister promised before elections that they will bring back all the black money and will deposit Rs 15 lakh in the account of every India. They have singularly failed to do that, and that’s why they are now resorting to demonetisation.

Sir, yesterday I mentioned that this is the most heartless, reckless, wayward step that any Government could think of. I do not know whether the Finance Minister would be able to reply. I do not know if he is aware that demonetisation was taking place. The story in Delhi is that he came to know only on the afternoon of November 8, after it was all decided. Now he is left holding the baby, so he has to pass the Bill. I do not blame him, and I don’t have any personal angst against him or any personal animosity towards him. I am saying that he is holding a baby who is already gasping. Because, you see, today, with one stroke of the pen, you have demonetised notes worth Rs 15.44 lakh crore.

The Prime Minister said dramatically in Goa, “Mujhe sirf pachas din dijiye, pachas din”, and tears came out from his eyes. But people were crying. Thousand and lakhs of people were on the roads, queuing up and not getting money. Many stories have been told about how people did not get treatment in hospitals, how people were refused in nursing homes, how people’s marriages had to be cancelled.

I’m not going into the stories. Mr Kalyan Banerjee yesterday described how an old lady was given a sack full of coins in exchange of money because there were no notes. The cash crunch is bound to be there. I don’t know if the Finance Minister will be able to reply.

What is the capacity of the four printing presses at Nashik, Dewas, Mysore and Salboni (in West Bengal)? They can print at the most Rs 300 crore worth of notes per month. So, it will take minimum 7 and a half months for the cash crunch to go.

We asked the Reserve Bank Governor two questions at the Finance Standing Committee meeting; the minister naturally was not there. How much money (out of Rs 15.4 lakh crore) in Rs 500 and Rs 1000 notes have been deposited till December 30, 2016? Till date the government is evading the answer. In our meeting, the Reserve Bank Governor said we are still counting.

We raised the sufferings of the people in the Parliament. Tell me, under what article of the constitution the Government can restrict me from withdrawing my own money from the banks? This is a violation of Article 300(A). It is a violation of rights.

We asked the Reserve Bank Governor, tell us when situations will be normal? When will we be able to withdraw our own money from the banks? The Reserve Bank Governor could not reply.

So, the Government is left with no replies. I want to ask the Hon. Finance Minister which are the major countries of the world which have demonetised their money, their currency, to drive out black money. Name one major country – USA, England, France, Germany, Sweden, Norway, Brazil – that carried out demonetisation? None. Gorbachev demonetised in 1991 and his government fell. Myanmar demonetised, Ghana demonetised, Nigeria demonetised, Venezuela demonetised, Zaire demonetised. Countries which were already going bust they demonetised.

Who gave the bright idea to the government that we must demonetise to get rid of the black money, this is the question which is eluding me. I have tried to read every statement and every article by every economist from Amarta Sen to Pranab Bardhan (of UCLA Berklee) to Pranab Sen (government’s former chief economic advisor) to Larry Summers who was President  Obama’s main economic adviser. Not one economist of repute – excepting whose who are in the pay of the government – have supported demonetisation as a means to fight black money.

They had to spend Rs 20,000 crore only to print new notes – and the new notes are bogus. I went to the ATM in Parliament Annexe today to withdraw money and it did not work. It could not dispense Rs 100 notes and Rs 500 notes. It dispensed only Rs 2000 notes. Where will people get the change for Rs 2000?

The Finance Minister is here and again I will humbly say that you have shifted your goal post from black money to Digital India.

What is Digital India sir? In a country where there are 5.1 lakh villages, you have got only 1.36 lakh bank branches. We have got 2.18 lakh ATMs. 40 percent of whom do not work and 40 percent of whom do not have cash. You are subjecting the poor people to this. I mentioned yesterday by taking away cash from the economy you have breaking the backbone of the society. Migrant workers from Bengal who had gone to other States to work, all have come back. They are not getting any salary.

By taking out cash from the economy, you have destroyed the small man – those who work in MSME, people who sell perishable goods, the vegetable vendors. You have put the housewives’ small savings in tremendous difficulty. You have caused the death of 150 people. I will not blame to Mr Jaitely. The blame should go to the man who announced the decision. In this House we did not have the heart to even offer condolences to these people. This is what demonetisation is.

We are talking of the technicalities of the Bill; I can go on speaking on my Statutory Resolution but who will give back those 150 lives which were lost due to this cruel, reckless step of demonetisation in order to help the electoral prospect of the ruling party? It is the worst decision since independence. And I again repeat, people of India will reply to this very cruel step.