Throughout note ban, RBI acted as PM's puppet: Chidambaram

Kolkata: Former Union finance minister P. Chidambaram said on Saturday that demonetisation has put the central bank’s reputation “at great risk”. “Instead of Reserve Bank of India (RBI)  recommending withdrawal of legal tender status for the currency, the government is recommending (that) to the RBI... It has been a reverse in  the sequence stipulated in the (RBI) Act,” Mr Chidambaram said during a discussion at the Kolkata Literary Meet.

According to him, the RBI has “acted as a puppet of the prime minister”. “The RBI board was called on November 7, 2016, and it was not known if there was a written notice, how many people attended the meet, if there was an agenda and how long did the meeting last. I have learned that only two of the three independent directors had attended the meet, which lasted for 30 minutes and then the recommendations were made to the government and the Cabinet was  waiting for them. How did the Cabinet know that the RBI would recommend about the legal tender status (of currencies) would be withdrawn? It was a command performance,” he alleged.

His remarks echo former RBI governor Y.V. Reddy’s, who had recently commented that the central bank’s reputation has been put at a risk. Mr Chidambaram  termed the decision to ban currency notes as ‘terrible’, and said that discussion was not held with anyone. “I think it is a terrible decision, ill-conceived, terribly implemented, with horrendous consequences and I think this would have been foretold by anyone who knows about money and monetary policy.”

The senior Congress leader said he would have resigned if demonetisation was implemented in his tenure as finance minister. “In the last 50 years, no major economy has demonetised its currency. India has been added to the list that includes Zimbabwe, North Korea and Libya, “ Mr Chidambaram said.