No talk of demonetisation when RBI decided on Rs 2000 note in May: Report

business

Updated: Jan 10, 2017 09:51 IST

There was no discussion on demonetisation when the Reserve Bank of India (RBI) decided in May last year to issue 2000-rupee banknotes, the Indian Express reported.

The bank’s central board discussed and approved the proposal to introduce Rs 2,000 notes on May 19 last year, the RBI said in its reply to an RTI query filed by IE.

Raghuram Rajan was the RBI governor when the decision was taken.

The RBI introduced the highest denomination notes in November after the government pulled out 500 and 1000-rupee banknotes in a shock announcement that sucked out 86% of the legal tender in circulation at that time.

“The RBI said that this (demonetisation) was not discussed during the May 2016 Board meeting or the subsequent Board meetings on July 7 and August 11,” the report added.

Read: RBI says ban on Rs 1000, Rs 500 notes proposed hours before PM’s speech

Contrary to the government’s claims that the decision to withdraw the 500 and 1000-rupee banknotes was taken by the RBI, the central bank said that it was the government which “advised” it go for demonetisation on the high-value banknotes.

“Government, on 7th November, 2016, advised the Reserve Bank that to mitigate the triple problems of counterfeiting, terrorist financing and black money, the Central Board of the Reserve Bank may consider withdrawal of the legal tender status of the notes in high denominations of Rs 500 and Rs 1,000,” the Indian Express quoted the RBI as saying in a seven-page note submitted on December 22 to a parliamentary panel.

The bank’s central board discussed the issue in its meeting the next day and “recommended the proposal to withdraw legal tender character of 500 and 1000 rupee notes to the Central government,’’ the report added.

The government has faced severe opposition criticism for hastily rolling out the demonetisation and triggering an unprecedented cash crunch across the country.

Prime Minister Narendra Modi has defended the move as a war against black money and counterfeiting.