RBI feels Modi’s demonetisation and frequent policy changes has tarnished its image

The government and the Reserve Bank of India have never been on each other sides even on the good times and these for sure aren’t the good times. Post demonetization, there has been a lot of mismanagement and it has caused a communication gap which further has led to the lack of coordination between them. This has been coming in the way of smoother implementation of several measures.

Reportedly, people in RBI feel that the central bank's image is being tarnished by frequent changes in circulars, most of which are issued on directions from the government. On the other hand, a section within the government feels that RBI has been slow in reacting to cues.

Other centre of issue has been the amount of old notes which have come back. The government has also contested the figure released by RBI on amount of old currency that is deposited with banks. Last week economic affairs secretary Shaktikanta Das asked RBI and banks to check the figures for any possible double counting.

However, people in the central bank feel that the RBI is torn between the people who are resentful of how the institution is being treated and people who are happily complying with the finance ministry orders.

RBI sources also believe that it is unfair to make the bank, and the banking system in general, responsible for tax compliance by depositors. Not only that it is not the central bank's sole job, checking for tax compliance at every banking transaction disrupts the smooth functioning.

Yet another issue of discord was the waiver of charges on card transactions till December 30. RBI is believed to have been of the view that complete waiver will act as a disincentive for banks, but the decision was implemented.