RBI says demonetisation was Modi government’s idea, deepens secrecy around moveRBI says demonetisation was Modi government’s idea, deepens secrecy around move

Contrary to popular belief, it was the government which had “advised” the Reserve Bank to junk Rs 500/1000 notes on November 7 and the board of the central bank the very next day recommended the demonetisation.

In a 7-page note to the Parliament’s Department-Related Committee of Finance headed by Congress leader M Veerappa Moily, the RBI stated that the Government had on November 7, 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.”

The RBI’s Central Board met the very next day to “consider the Government’s advice,” and after “deliberations,” decided to “recommend to Central Government that the legal tender status of the banknotes in the high denominations of Rs 500 and Rs 1000 be withdrawn.”

Union Cabinet headed by Prime Minister Narendra Modi met within hours of that recommendation on November 8 and banned circulation of old 500 and 1000 rupee notes.