The RBI has for the first time admitted that the demonetisation idea had originally come from the Centre’s Narendra Modi government. According to its written submission before a parliamentary committee last month, the RBI said that it approved the note ban idea a day after it was ‘advised’ by the Modi government.
In a seven-page note submitted to the Parliament’s Department Related Committee of Finance headed by Congress leader M Veerappa Moily, the RBI said, “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.”
According to Indian Express, which reported the contents of the note submitted before the parliamentary panel, the RBI Central Board had met the very next day to “consider the Government’s advice,” and after “deliberations,” decided to recommend to Central Government that the legal tender status of the banknotes in the high denominations of Rs 500 and Rs 1000 be withdrawn.”
This latest revelation comes just few weeks after an RTI reply by the RBI on Prime Minister Narendra Modi’s demonetisation announcement had posed more questions around fixing the liability of the decision.
India’s federal bank, in its RTI reply last month had said that its board had approved the move to ban high-denomination notes less than just three hours before Prime Minister Narendra Modi announced the decision in a televised address to the nation.
This sharply contradicted the statement made by the RBI Governor, Urjit Patel, who, on 7 December, had claimed that the decision to ban high denomination notes was not taken in haste.
While announcing the status quo on interest rate, he had said, “The decision has not been taken in haste but after detailed deliberations. There had to be a high level of secrecy surrounding this decision and the fact is that such a large country was indeed taken by surprise when the decision was announced.”
The appointment of Patel as the successor of Raghuram Rajan, votary of the RBI’s autonomy, has also been seen as a move by the central government to easily manipulate the fiscal policy to suit its political agenda.
The note ban decision has adversely impacted a large swathe of Indian population with more than 100 having already lost their lives due to demonetisation related stress. Million continue to struggle for access to their hard-earned money because of what many have termed ‘draconian’ restrictions on their ability to withdraw money.