In a hurriedly convened meeting hours before Narendra Modi government came out with demonetisation decision, RBI’s Central Board issued approval to the scheme but also rejected the justification that noteban exercise would tackle black money and counterfeit notes, The Indian Express reported. The board termed demonetisation move by the government as ‘commendable’ even as it warned it “will have a short-term negative effect on the GDP for the current year,” the minutes of the 561st meeting revealed.
The minutes were signed by RBI Governor Urjit Patel on December 15, 2016, five weeks after the meeting was held. In all, six objections, described as “significant observations”, were recorded in the minutes by the RBI Board.
The Indian Express report said that the minutes of the meeting were signed by RBI Governor Urjit Patel on December 15, 2016.
Among the various objections raised by the RBI board were:
Short term negative effect on GDP
Rs 400 crore fake notes not very significant share of total cash
Most black money not held in cash, but real estate or gold
Adjusted for inflation, the difference between economic growth and cash available not so stark
The minutes ended with the RBI’s resolution for the withdrawal of of Rs 1,000 and Rs 500 notes with these lines: “The Board was assured that the Government will take mitigating measures to contain the use of cash… the Board considered the memorandum and after detailed deliberations concluded that in larger public interest, the balance of advantage would lie in withdrawal of legal tender status of Rs 500 and Rs 1,000 currency notes currently in circulation…”
Meanwhile, commenting on the same, former Finance Minister P Chidambaram tweeted: “RBI Board, with many members absent,met at 5.30 pm on 8-11-2016 and disagreed with the key reasons given by government, yet obediently endorsed demonetisation. That was a black day in RBI’s history.”