RBI Was Not In Loop About Demonetization: Report


An official who was part of the decision-making hinted that there were no proper discussions held about demonetization in the RBI Board

New Delhi: The Supreme Court Constitution Bench has upheld by a 4:1 majority the decision taken by the Union Government six years ago to demonetize the currency notes of Rs. 500 and Rs.1000 denominations. On this, The Indian Express reported Reserve Bank of India (RBI) was “never in the loop” about the withdrawal of notes. High-Level sources of The Indian Express said the Central Board of RBI was not in the loop about the matter.

As per The Indian Express report, an official who was part of the decision-making hinted that there were no proper discussions held about demonetization in the RBI Board. He said, “It is said that the government was in consultation with the RBI for six months. The (RBI) board was never in the loop. Maybe one or two people from RBI would have known. Suddenly within half an hour or one hour, you issue a notice and call a meeting without even informing about the agenda.”

According to the report, in May 2016, six months before the demonization RBI board had cleared the introduction of Rs 2,000 notes. But the withdrawal of 500 and 2000 notes was not discussed in July and August board meetings in 2016.

In its Right to information (RTI) reply to The Indian Express earlier, RBI said on May 2019, a proposal to introduce Rs 2000 notes was discussed and approved by the Central Board. However, the withdrawal of legal tender of the Rs.500 and Rs.1000 notes was not discussed at the May board meeting last year.

The Indian Express reported that RBI said it was also not discussed during the subsequent Central Board meetings on July 7 and August 11. Raghuram Rajan was the Governor when the proposal to introduce new 2000 rupee notes got a green signal from RBI Board that year.

Also Read: “RBI Did Not Show Independent Application Of Mind”: Dissenting Judge In Demonetization Case

When RBI was enquired about whether the RBI Central Board received any proposal to demonetize Rs 500 and Rs 1000 notes from the government in another RTI reply RBI said, “the Central Board of Reserve Bank of India in its meeting held on November 8, 2016, recommended the proposal to withdraw legal tender character of 500 and 1000 rupee notes to the Central Government.’’

The Indian Express reported RBI declined to provide the minutes of the Central Board meeting on November 8, 2016. Stating the reason for not sharing the minutes of the meeting, RBI said the “information sought is exempt from disclosures under 8(1)(a) of the RTI Act, 2005.”

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