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Reserve Bank Gave Nod To Demonetisation Less Than Three Hours Before Modi's Nov 8 Speech: Bloomberg

Earlier this month, RBI governor Urjit Patel said that the decision to scrap the old currency "wasn’t taken in haste but after detailed deliberations"

29/12/2016 4:31 PM IST | Updated 29/12/2016 5:41 PM IST
Danish Siddiqui / Reuters

The Reserve Bank of India board gave its nod to junk old ₹500 and ₹1000 notes and effectively ban 86% of the country's currency barely two and a half hours before PM Modi's Nov 8 live address to the nation, Bloomberg reported citing a response to an RTI query filed by the news organisation.

According to the report, RBI said details on how many board members approved the decision isn't "on record."

These responses raise several questions about the amount of planning that went into the move, running somewhat counter to the claims made by both the RBI and government officials. RBI had thus far declined to be transparent about how many meetings took place ahead of the decision.

Earlier this month, RBI governor Urjit Patel said that the decision to scrap the old currency "wasn't taken in haste but after detailed deliberations" and that secrecy had to be maintained.

And government officials have previously pinned the decision to demonetisation on the Reserve Bank. Late last month, Law and IT Minister Ravi Shankar Prasad said the decision to the demonetise was taken by the government on the recommendation of the Reserve Bank of India.

However, according to an Indian Express report, RBI has indicated the government took its decision to demonetise higher denomination notes on 7 November, with RBI making its decision the next day, raising questions about how much autonomy the central bank has.

Most advanced economies have independent central banks that deploy monetary policy tools for the long-term benefit of the economy. These decisions are usually kept independent of government decisions as the latter can often make populist and short-term policy decisions that could hurt the economy and the national currency in the long-term.

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