While India’s leaders make a mockery of the constitution and the economy, the Reserve Bank of India made a mockery of the Right to Information Act. Why should the RBI, which is supposed to be an independent financial regulator, suppress its minutes on demonetisation, illegally deny them under the RTI Act and then leak it to the media at a time convenient to them?

When a citizen sought the minutes of the RBI meeting on demonetisation, the public information officer (PIO) denied the information citing arbitrary reasons. Even after a journalist accessed the minutes and reported on it in November 2018, the PIO didn’t relent and refused to release the information to the RTI requestor.

The citizen was made to wait until a second appeal was listed before a new central information commissioner in February 2019, where, again, the officials refused to part with the copies of minutes. The PIO pleaded to national security reasons under 8(1)(a) for denial.

The Central Information Commission (CIC) rebuked the RBI, on February 18, for “perfunctory handling” of an RTI application and sought records of its board meetings where the issue of demonetisation was deliberated upon and issued a show-cause notice to its central public information officer (CPIO). Only then did the CPIO of the RBI release the minutes of the meeting after withholding it for two years.

Activist Venkatesh Nayak of the Commonwealth Human Rights Initiative (CHRI) had sought records of all the meetings of the RBI’s central board of directors along with the papers, presentations and other documents placed before it, which resulted in the decision to implement demonetisation on November 8, 2016, by Prime Minister Narendra Modi.

As usual, the RBI refused to give any information and cited the exemption clause from section 8 (1) (a) of the RTI Act. The section exempts from disclosure any information which would prejudicially affect the sovereignty and integrity of India and the security, strategic, scientific or economic interests of the state with relation to any foreign state or lead to the incitement of any offence.

Also Read: RBI Rejects RTI Request for Minutes of Demonetisation Decision

Nayak then approached the CIC. During the hearing before the CIC in February 2019, the RBI’s representative accepted that the information “prima facie was wrongly denied.”

Venkatesh had sought information on two points: First: The copies of the minutes of the meeting of the RBI’s Board of Governors and any recommendation that was submitted regarding the demonetisation exercise to the central government. The copy was sent after two years, after the CIC pulled it up. Nayak said that the RBI’s board had “essentially only rubber-stamped the government’s initiative.”

Nayak’s second point pertains to petitions, recommendations or any communication submitted by any person, entity or organisation to the RBI regarding demonetisation and all the replies that the RBI had sent to such entities in addition to seeking copies of all the file notings and correspondence in this regard. The CPIO quoted Sec 7(9) to deny this information, ignoring that it is not an exception but facilitation to give information. First, they used section 8(1)(a) and then section 7(9) of the RTI Act to deny the information. Hardly any information can be called “sensitive” when the minutes of the demonetisation meeting is concerned.

The investigation

In an investigative report the Indian Express, after accessing the minutes of the RBI board meeting, which was held hurriedly at 5:30 pm on November 8, 2016, stated that minutes revealed that the board had warned the government of its adverse effects in the short term. The report by Ritu Sarin also said that the board did not agree with the government’s justification that demonetisation would extinguish black money and counterfeit notes. The prime minister had repeatedly cited these two grounds as the key objectives of demonetisation in various meetings and in his address to the nation.

Also Read: RBI Never Thought Demonetisation Would Tackle Black Money or Counterfeiting

Another media report from the National Herald stated that the timing of the report, barely 10 days before the RBI Board met again to discuss the government’s proposal that called on the RBI to dip into its reserves and transfer an amount, speculated to be in the range of one to three lakh crore of rupees, to the government for public spending before the election, is significant.

The National Herald asked, “Is the ‘leak’ of the two-year-old minutes of the meeting meant to reassure people that the central banker remains prudent and would once again place on record its reservations and allow the Government to bite the bullet? Or is it meant as a message to the government that more ‘leaks’ of the government’s intent, proposals etc. could be embarrassing in an election year?”

This report further said that “the disclosure of the two-year-old minutes of the board meeting, something that the RBI had steadfastly refused to share till now, is clearly designed to salvage the reputation of the central banker and the RBI governor Urjit Patel, who had been accused of meekly succumbing to the government.”

The minutes also reveal that the RBI was aware of the adverse impact the move would have on growth, GDP, the medicare sector, tourism and the informal economy. It also reveals that the RBI Board had warned the government, in writing, which no one cared to consider.

Also Read: Minutes of RBI’s Pre-Note Ban Board Meeting Raise Questions Over Decision-Making Process

RBI cautions against the negative impact on GDP

The minutes of the 561st meeting of the RBI’s central board, which was convened hurriedly in New Delhi at 5.30 pm on 8 November 2016, revealed that the central bank’s directors described the move as “commendable” but also warned that demonetisation “will have a short-term negative effect on the GDP for the current year.”

Analysing these minutes, the Indian Express reported that, in less than four hours before Prime Minister Narendra Modi announced demonetisation on November 8, 2016, the central board of the RBI gave its approval to the scheme but also rejected, in writing, two of the key justifications for the move — elimination of black money and counterfeit notes. These minutes were signed by the then RBI governor Urjit Patel on December 15, 2016, five weeks after the meeting was held.

The RBI board also recorded six objections, which were described as “significant observations”. The RBI directors, after receiving a proposal draft of the scheme from the Ministry of Finance on November 7, 2016, argued that the government’s reasoning, that the withdrawal of HD (high denomination) currency notes of Rs 1,000 and Rs 500 would help in curbing black money and restrict circulation of counterfeit cash, did not really hold up.

Most of the black money is in real estate

Referring to the pretext that demonetisation would curb the flow of black money, the minutes recorded the facts and figures given in the government’s white paper on black money and noted, “Most of the black money is held not in the form of cash but in the form of real sector assets such as gold or real-estate and… this move would not have a material impact on those assets.”

Regarding fake currency, the ministry informed the board that counterfeiting is on the rise in denominations of Rs 1,000 and Rs 500, and the total quantity of fake currency is estimated to be around Rs 400 crore.

The RBI Board further explained that “while any incidence of counterfeiting is a concern, Rs 400 crore as a percentage of the total quantum of currency in circulation in the country is not very significant”. Among the other objections, the board recorded that the growth of the Indian economy and its linkage to the high amount of HD currency in circulation, as pointed out in the government’s proposal, was flawed since the rate of inflation had not been taken into consideration.

The minutes also pointed out that “the growth rate of economy mentioned is the real rate while the growth in currency in circulation is nominal. Adjusted for inflation, the difference may not be so stark. Hence, this argument does not adequately support the recommendation…” and warned of a negative impact, saying “the withdrawal of HD currency notes would have a negative impact on two sectors in particular: medical and tourism.”

Also Read: How Successful Was Modi’s War on Black Money Stashed Abroad?

It suggested that private medical stores should also be included in the exemption list. Describing the problems that incoming tourists would encounter, the RBI directors pointed out that, “arriving domestic long distance travelers who may be only carrying high denomination notes will be taken by surprise at railway stations/airports for payment to taxi drivers and porter charges and hence put to hardship. It would also have an adverse effect on tourists.”

The RBI governor, however, saw a positive feature. He said: “the proposed step also presents a big opportunity to take the process of financial inclusion and incentivising use of electronic modes of payment forward as people can see the benefits of bank accounts and electronic means of payment over the use of cash…”

Finally, the RBI agreed with the withdrawal of banknotes of Rs 1,000 and Rs 500, with some assurances. “The board was assured that the government would take mitigating measures to contain the use of cash… the board considered the memorandum and after detailed deliberations concluded that in the larger public interest, the balance of advantage would lie in the withdrawal of legal tender status of Rs 500 and Rs 1,000 currency notes currently in circulation…”

Also Read: No Information on How Much Black Money Removed by Demonetisation: RBI to Parliamentary Panel

Black money reports not for the public

The Union finance minister recently stated in parliament that black money study reports may be made available to MPs who sit on the Department-related Parliamentary Committee on Finance but they would not be placed in the public domain. The government ignored the proviso underlying Section 8(1) of the RTI Act that information which cannot be denied to the parliament or state legislatures cannot be denied to a citizen.

Who will be liable for the lives of more than a hundred citizens that were lost in queues outside banks to exchange their hard-earned money?

M. Sridhar Acharyulu is a former Central Information Commissioner and a professor of media law at Bennett University.