Did the RBI keep the PM in the dark?

'When I met the prime minister on November 15 there was no RBI report with the prime minister as to why this was done.'
'When I asked the PMO officer about this, he said the RBI did not bring this to the PM and did it independently.'
'When I asked how could the RBI ban DCCBs from accepting deposits from farmers in old notes when the government gazette released on November 9 allowed them to do so, this officer told me that not even senior PMO officials had any idea about this RBI ban.'

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Dilip Sanghani, left, below, chairman of the National Federation of State Cooperative Banks, which has 371 district central cooperative banks (DCCBs) under its umbrella, tells Rediff.com's Prasanna D Zore that the RBI acted unilaterally to ban withdrawal and exchange of Rs 500 and Rs 1,000 notes from DCCBs, thereby leading to a complete halt in agricultural trade.

While exchange, withdrawal and deposit of these specified currencies did take place at these DCCBs till November 12, four days after Prime Minister Narendra Modi scrapped these notes as legal currency, the RBI, on November 13 hurriedly stopped these DCCBs from exchanging or accepting deposits of these notes from November 13 after these banks reported 100 times increase in deposits of these Rs 500 and Rs 1,000 notes between November 9 and 12.

Sanghani was thrice elected as a BJP MLA and and four-time BJP MP from Amreli.

What are the problems being faced by account holders of DCCBs in India after the RBI stopped them from exchanging and depositing Rs 500 and Rs 1,000 notes into these banks?

When the farmers are taking their Kharif crops like groundnut, cotton, etc, to the markets, there is no purchase or selling of their produce.

Old notes of Rs 500 and Rs 1,000 that are available with traders are not being accepted by farmers because the DCCBs have been stopped from accepting these deposits and so they are not able to sell their Kharif produce.

Whatever old notes the farmers had with them after they sold their produce in the markets before November 8, are not being accepted by the DCCBs because of the RBI restriction.

This has led to complete lockdown of trading among these economic agents.

In my district (Amreli), more than 50 per cent of farmers have their bank accounts with DCCBs and their financial activity has come to a complete halt.

What kind of losses are the farmers suffering because of the RBI restrictions on depositing and exchanging of the specified notes at these DCCBs?

As of now they are not suffering any losses because their agricultural produce is lying at their houses/godowns.

Nobody is buying it from them because traders don't have enough cash for their purchases and farmers are not accepting the old notes because the DCCBs have been disallowed from accepting it from them.

These crops may not suffer any losses for at least two months and we are yet into the 15th day of this ban.

If these farmers have to avail of the Rs 21,00 crore credit line announced by the government for the Rabi season through NABARD (National Bank for Agriculture and Rural Development) to these DCCBs, then the farmers need to first pay their earlier outstanding loans.

So, this Rs 21,000 crore credit arrangement will be of no use to farmers as this money is for new loans.

Are you saying this credit facility will be of no use to the farmers?

Yes, this step is only work half done. This will be of use only if farmers are allowed to use old Rs 500 and Rs 1,000 notes they have to repay their debt to the DCCBs.

You allow insurance companies to accept old notes for paying insurance premium because these are big companies, but you don't let farmers retire their debts by putting restrictions on such use at the DCCBs.

This is discrimination.

Aren't the farmers allowed to purchase seeds for using them for the Rabi season by using Rs 500 notes?

Yes, but then seeds must be purchased only from government appointed agencies and in Gujarat such agencies are far less in number and they don't have adequate amount of seeds to meet the farmers' demand.

Do you think the PM's demonetisation policy will help tackle black money, corruption and terrorism?

Modiji's aim for initiating this scheme is very good for the nation's future and will make India economically strong and secure.

But the RBI has thrown the spanner in the government's work by putting restrictions on DCCBs.

The government took a decision to scrap old Rs 500 and Rs 1,000 notes on November 8, and on November 9, the government gazette included cooperatives to allow these notes. That was a very good decision.

But on November 13 (Sunday), the RBI, first in Gujarat, and on November 14 throughout India, put a restriction on DCCBs; that is totally illegal and that has led to huge problems for the farmers in India.

This unilateral RBI decision is solely responsible for the farmers' problems.

Didn't the RBI submit its report to the government and the government too knows about the RBI's decision?

Yatin Oza of the Aam Aadmi Party has alleged, and he claims to have videos, that rich people exchanged their Rs 500 and Rs 1,000 notes at these DCCBs in Gujarat for Rs 10, Rs 50, Rs 100 denomination loans, thereby converting their unaccounted wealth into white money.

As per the RBI guidelines, every bank keeps a record of number of notes they get and they give out along with their denominations in the books of banks.

Such reports are sent daily to the RBI.

If what Mr Oza has alleged is true, then it can be easily found out by instituting an inquiry into it.

Mr Oza is a good advocate and good friend of mine, but then after joining AAP, he has adopted his party's tactics of spreading unfounded lies. That is their old tactic.

He is just following the teachings of his party.

What action do you want to be taken against the RBI? Did you meet the prime minister in this matter?

We told this to the finance ministry on November 13 that the regional head of the RBI in Gujarat put restrictions on DCCBs from exchanging and depositing old notes.

We told them that such restrictions cannot be selectively imposed on one state because it is a decision of the central government.

To hide this inconsistency and illegality, the RBI imposed the same restrictions on DCCBs across India the very next day (Monday, November 14).

I just want to ask the finance ministry if the restriction on DCCBs in Gujarat only, before imposing the same on DCCBs across India, is legally tenable or not.

According to Article 14 of Constitution if a bank has all the required licenses then you do not have any right to stop them from doing their business unless you have served a prior notice to them or suspended their license on the basis of any wrongdoing.

But to take such action before serving notices or suspension of licenses is utterly illegal.

Out of the 371 DCCBs in India, 368 DCCBs still have valid licenses and so all the rules applicable to other banks in the country should also be applied to them.

The banks that cater to the rich are still going about their businesses, but those where the poor farmers have their accounts are under lockdown because of some silly reason given by the RBI. That is not acceptable to us.

Did you meet Gujarat Chief Minister Vijay Rupani or BJP President Amit Shah or Prime Minister Modi to put forth your suggestions?

I met the prime minister and nobody is bigger than him.

I apprised him about the problems faced by the farmers because of this RBI restriction.

What did he tell you?

He accepted that there were some problems, he listened to me for more than 20 minutes and then directed a PMO official to look into the issue I had raised and find some solution to ameliorate the plight of farmers.

The PM told me that to protect the money of the poor and the farmers of India were his most important duty and he will see to it that arrangements were made so as not to put these sections in problems.

The (PMO) officer assured me that only the RBI can find a solution and I think this officer passed on my suggestion to the RBI.

But till now the RBI is not coming out with a solid solution; it is just finding piecemeal solutions to farmers' woes.

Those officers in the RBI don't even know that groundnut crop grows under the earth and not on trees.

The farmers are in difficulties because of such people.

Are you satisfied by the PM's response that the problems faced by farmers will be resolved?

I am completely satisfied by his response. He has taken this decision for the larger good of the nation and it will strengthen India's economy.

I thank the prime minister for taking such a bold step and offer my support to him.

But the RBI is solely responsible for all the problems the farmers are facing.

You hold only the RBI responsible for this problem. But do you think the RBI would not have consulted the prime minister before taking such a decision?
The RBI decision to stop DCCBs from banking came on November 13.

I met the prime minister on November 15 and the RBI had not told him about this decision.

But the decision to stop the exchange of notes or withdrawal and deposits at DCCBs in Gujarat was taken two days before you met the prime minister, and a day later for all of India, and yet you claim that the prime minister did not know about the RBI's decision?

Till that time (November 15, when I met the prime minister) there was no (RBI) report with the prime minister as to why this was done.

When I asked the PMO officer about this, he said the RBI did not bring this to the PM and did it independently.

When I asked how could the RBI ban DCCBs from accepting deposits from farmers in old notes when the government gazette released on November 9 allowed them to do so, this officer from the PMO told me that not even the senior officials in the PMO had any idea about this RBI ban on DCCBs.

This PMO officer assured me that he will discuss this issue with the finance ministry and come out with some solution.

So, have you got a solution to the woes of farmers who have accounts with the DCCBs in India?

They are doing it in a piecemeal way. They haven't yet found a proper solution.

Do you think this piecemeal approach can help solve the problems of farmers with accounts in DCCBs?

I welcome whatever steps have been taken till now, but we will continue to discuss these issues.

If you can allow private businesses like Biz Bazaar and petrol pumps to accept these notes despite there being no government oversight on these private people, then why have you banned the DCCBs that are overseen by the state governments, NABARD and the RBI?

Despite such oversight you have withdrawn the facility from the DCCBs, but are allowing Big Bazaar and petrol pumps to collect old notes only shows your discrimination.

Who is being discriminatory here? Are you saying the RBI is discriminatory or the government is being discriminatory against the DCCBs?

The RBI.

If the RBI were to permit the DCCBs to exchange old notes and allow deposits and withdrawal of these notes, then how much money do you think will be exchanged deposited or withdrawn?

I have no exact idea about how much money will change hands or will be deposited.

But all the banks are now computerised and the money will be accounted for.

Wherever there has been a bumper Kharif harvest the farmers will have good money with them and those who have already sold their produce before November 8 are now saddled with old notes and nowhere to deposit them.

Post Kharif is the only time when farmers have good money in their hands.

The farmer slogs it out for an entire year waiting for this time and what does he find when it comes?

He has money, but cannot deposit it in banks where he has his account.

How has this ban affected the prices of Kharif crops that are still in the godowns or homes of the farmers?

The prices had crashed below the minimum support price that the government offers.

That is why the Government of India and Modiji, for the welfare of farmers, ordered the purchase of farmers' produce above the MSP and asked NAFED (National Agricultural Cooperative Marketing Fedration of India, under the Union agriculture ministry) to buy the produce.

So the NAFED came to buy the Kharif crops from the farmers.

But now NAFED doesn't have enough of new currency or Rs 10, Rs 50, Rs 100 denomination notes to buy it from the farmers, leading to a complete breakdown of agricultural trade.

Can't NAFED pay the farmers by cheque?

The system prevalent among the buyers and sellers of agricultural crop is in cash.

Who will then pay or buy using cheques?

Even if NAFED pays by cheques, where will the farmers deposit their cheques?

Even if they manage to deposit it, how will the farmers withdraw cash from their accounts in the DCCBs when the RBI has banned banking operations of DCCBs?

Suppose if I get paid Rs 100,000 by cheque for my cotton or groundnut, and I deposit it, I can still not withdraw Rs 100,000 from the DCCB because of the RBI ban.

I will need this money to pay wages to workers and for other expenditure.

By when do you think the situation for farmers will improve?

When the government feels the status quo will harm it, then they will act.