Reserve Bank of India (RBI) Deputy Governor Viral Acharya on Monday said the remonetisation process will be completed in the next two to three months as the process is going on at a fast pace.
Acharya added 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 8 November last year, the government withdrew the legal tender status of Rs.500 and Rs.1,000 notes in its effort to curb black money in the economy. The high denomination currency was to the tune of Rs.15.5 lakh crore in circulation.
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. He said, “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 sector is interesting and worth thinking about. We have to wait for a few quarters to say exactly where things are.”
The GDP slowed marginally to 7 per cent during the October-December quarter, defying expectations of a sharper hit to economic activity due to currency replacement.
In his first public speech on 28 February after assuming office, Acharya had suggested fresh structures through which the non-performing assets faced by Indian banks could be resolved and called for a need of greater reforms in the sector.
Gross non-performing assets across 42 listed banks in India have increased to Rs 7 lakh crore 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.