Published On : Tue, Jan 10th, 2017

Government advised RBI of note ban day before PM’s announcement

Contradicting the Modi government, which had asserted that the Reserve Bank of India recommended a ban on Rs 500 and Rs 1000 notes, the central bank has said that it was the government which advised it to do so, as late as November 7, the day before the note ban was announced by Prime Minister Narendra Modi.

According to a report in The Indian Express, in a submission to a Parliamentary panel late in December, the RBI in a 7-page note said that, “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.”

Backing the government’s move, the note added that, “Elimination of black money will eliminate the long shadow of the ghost economy and will be positive for India’s growth outlook.”

The RBI Central Board met the very next day (ie November 8) to “consider the government’s advice,” and after “deliberations,” decided to recommend to the central government that the legal tender status of the banknotes in the high denominations of Rs 500 and Rs 1000 be withdrawn, said the note.

Union Minister for Power Piyush Goyal had however claimed on November 16 during a debate on demonetisation in Parliament that the RBI Board of Directors had taken the decision to demonetise Rs 500 and Rs 1000 notes.