The central bank had listed four objections to the overnight notes ban announced by PM Modi before agreeing to it “in larger public interest”, an RTI reply has revealed.
Reserve Bank of India (RBI) board had warned about the short-term negative effect of demonetization on growth and had noted that it would have no material impact on the campaign against black money.
The central bank board had met just about 2.5 hours before PM Modi’s sudden announcement in a televised address to the nation on November 8, 2016. The ban of Rs. 500 and 1,000 notes, which wiped out 86 per cent of the cash in circulation, was announced even before the board’s approval.
The approval was sent to the government five weeks later, on December 16, and the RBI had recorded its objections to most of the government’s arguments for banning high value notes.
According to the minutes of the RBI meeting, shared in response to the Right To Information (RTI) query, the directors had noted that it was a “commendable measure” but would have a short term negative effect on the GDP “for the current year”.