RTI reveals, RBI did not agree with govt’s logic of demonetisation

New Delhi: The Reserve Bank of India had warned the Modi government about the decision to ban the currency note of 1000-500. Actually, the RBI did not agree with the argument that black money transactions are done through cash. The RBI believed that black money was found in properties like gold and real estate rather than cash. This information has been received by RTI activist Venkatesh Nayak under Right to Information Act. He has put this information on the website of the Commonwealth Human Rights Initiative (CHRI).

This report says that on November 8, 2016 at 8 pm, Prime Minister Narendra Modi had announced the removal of notes of 500 and 1,000 rupees from circulation. But a few hours before the announcement, the 561th meeting of the Board of Directors of the RBI in Delhi was held at 5.30 pm. In this meeting, the RBI had expressed disagreement with the government’s logic about this decision. The board of directors of the RBI believed that most of the black money was not in cash but in real estate and gold assets. In such cases, the currency ban will not affect these properties.

What was the logic of the government?

The government had argued behind the demonetisation, that the circulation of notes of 500 and 1,000 rupees has increased by 76.38 per cent and 108.98 per cent, respectively. Referring to the White Paper of the Revenue Department, the government said that black money transactions are in cash. The government also mentioned that the fake currency notes have also increased to close to Rs 400 crore. However, the RBI did not agree with the logic of the government. At the same time, the board of directors had notified the currency ban, but it also had a negative impact on the GDP in the short run. The board of directors had said that the government could take steps to reduce the use of cache.

Who was involved?

Let you know that this meeting was presided by RBI governor Urjit Patel. Urjit Patel had resigned earlier to complete the term in December 2018. At the same time, the current RBI governor Shakikanta Das also joined the meeting, and then he was the Secretary of Economic Affairs. Apart from this, Deputy Governor R. Gandhi, SS Mundhra also attended the meeting. However, another member of the Board of Directors, N Chandrasekharan was absent in the meeting. Chandrasekharan is currently the Chairman of Tata Sons.