RBI 'approved cash ban just 3 hours' before Modi's Nov 8 announcement

Mumbai: The Reserve Bank of India (RBI) approved the demonetisation of Rs 500 and Rs 1000 notes less than three hours before Prime Minister Narendra Modi’s announcement on national television on November 8.

According to a report in Bloomberg, the RBI said in response to queries under RTI that information on how many members of the RBI Board of Directors approved the move is ‘not on record’.

However, it said that the decision to demonetise old notes was taken at 5:30 pm on November 8, in a meeting of the bank’s board.

The bank's board consists of Governor Urjit Patel, 3 deputies - R Gandhi, SS Mundra and NS Vishwanathan – and a host of eminent personalities including the Economic Affairs Secretary Shaktikanta Das. 

Union Power Minister Piyush Goyal had on November 16 told lawmakers that a 10-member board of the RBI came up with the idea of demonetisation.

After Rs 500 and Rs 1000 notes were banned, the government introduce fresh tender of Rs 5000 and also Rs 2000. However, lack of availability of new currency at banks and in ATMs led to chaos throughout the country.

The RBI has subsequently been criticised for a lack of preparedness and numerous policy U-turns that contributed to the chaos following demonetisation. Earlier in December for example, the central bank issued an order prohibiting deposits of over Rs 5000 in old notes more than once till December 30. The order provoked outrage, forcing the RBI to withdraw it eventually.

Questions have also been raised by the Opposition and some sections of the public about the central bank's independence and communication policy under the leadership of new governor Urjit Patel.

In its response to the RTI query, the RBI did not reveal as to how many new 2,000 and 500 rupee notes were being printed each day in its mints, or the number of hours each day the printing presses were working in the month leading up to the November 8 announcement.

"The RBI top management must communicate more through the media and speaking opportunities," former Deputy Governor of RBI Usha Thorat wrote in a news daily on Wednesday. She said it was necessary to do so in the interest of transparency and credibility.

50 days have passed since old notes were banned, but many ATMs are still out of cash. Meanwhile, thousands of crores in new notes are being seized across the country in Income Tax raids, raising doubts about the effectiveness of demonetisation.