HOURS BEFORE Prime Minister Narendra Modi announced demonetisation of high value currency notes on November 8, 2016, the Reserve Bank of India’s (RBI) central board of directors had rejected the main reasons — curbing the flow of black money, counterfeit currency and excessive currency in circulation — which were cited by the government, the Congress said on Monday.
Releasing the minutes of the 561st meeting of the RBI’s central board of directors, held at 5.30 pm on November 8, 2016, Congress spokesperson Jairam Ramesh said: “It is clear that demonetisation was not a decision of the Reserve Bank of India. It was a decision of the Prime Minister of India.” The Indian Express had reported about the minutes of the meeting on November 9, 2018.
Quoting the minutes, Ramesh said that hours before the announcement of demonetisation, the RBI central board had said that “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.”
On fake currency, he said the RBI board said that while counterfeit notes are on the rise in denominations of Rs 1,000 and Rs 500, the total quantity of such currency is estimated to be around Rs 400 crore. The RBI board, he said, had noted 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”.
As for excess currency in circulation, he said the RBI board had concluded that “the growth rate of the economy is the real rate while the growth in currency in circulation is nominal. The difference is not stark. Hence this argument does not adequately support the recommendation.” Ramesh said the minutes were obtained through a Right to Information (RTI) application filed by an activist. He said despite the observations, the RBI board had backed the move and called it a commendable measure as it was “pressured” by the government.
The “minutes of the RBI board meeting of 8-11-2016 exposes the incompetence of the government that announced demonetisation. Despite warning by RBI that none of the reasons for demonetisation was justified, the government went ahead and destroyed the livelihood of millions of people. Eventually, the RBI Governor paid the price for capitulation and resigned. The authors of demonetisation are still sitting pretty on their thrones. I am sure people will deliver their verdict,” former Finance Minister P Chidambaram said.