High-level sources said that the Central Board of the Reserve Bank of India (RBI) was “never in the loop” about the withdrawal of notes during the demonetisation of currency notes of Rs 500 and Rs 1,000 denominations six years ago by the central government.
“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,” said an official who was part of the decision making.
The RBI board had cleared the introduction of Rs 2,000 notes six months before demonetisation in May 2016 but didn’t discuss the withdrawal of 500 and 1000 notes in the July and August board meetings. Raghuram Rajan was the Governor when the proposal to introduce new 2000 rupee notes was approved by the RBI board in May that year.
The demonetisation was announced on November 8, 2016.
On a specific query about whether the RBI Central Board received any proposal to demonetise Rs 500 and Rs 1000 notes from the government, the 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 important point is whether all the merits or demerits, pros and cons were gone through in detail, and there is no clarity on this,” the official said on conditions of anonymity. “Possibly, the court could have commented something for the future that when there is an autonomous body or an expert body which is supposed to look at this aspect, its perspectives should be given significant weightage,” he said.
