RBI to Parliament on demonetisation: acted on government instructions

The RBI’s first and most authenticate response about its role in the demonetisation response indicate that the central bank has acted as per government instructions.

In a reply to the Parliamentary Committee on Finance led by Congresses’ M Veerappa Moily, the RBI submitted answers to several tactical questions on the subject.

The RBI reply indicate that the government on November 7, 2016 ‘advised’ “the RBI to mitigate the problems of counterfeiting, terrorist financing and black money, the Central Board of the RBI may consider withdrawal of legal tender status on of the notes in high denominations of Rs 500 and Rs 1000”

The CBD has met on November 8 and within hours, the government announced demonetisation decision.

The RBI’s written response shows that the government has somewhat forcefully sought recognition about the step so that the apex body – the Central Board of Directors would meet to make the suggestion.

The Central Bank has also not attached prime importance to black money fight as the chief goal of demonetisation. Rather, it given black money fight as an attached objective after counterfeiting and terrorist financing.

Here, the RBI described demonetisation as “A very rare opportunity to tackle fake notes, terrorist financing and black money.”

Questions set by the Panel and answers were availed by the Indian Express.

After the demonetisation declaration, the RBI officials kept themselves away from the campaign that followed.

The people active were few government officials like the Economic Affairs Secretary Sri.  Shaktikanta Das. Sri Das is also a member of the RBI’s CBD that has to recommend the step. Besides the RBI Governor and four Deputy Governors, there are around 16 government nominees in the CBD. 

Tags : rbi to parliamentary panel on demonetisation