The Reserve Bank of India agreed to demonetisation one day after the Modi government advised scrapping ₹1000 and ₹500 notes on 7 November, NDTV reported today.
The RBI said that while the government had recommended demonetisation, the central bank felt that "such a proposal could not have come at a more opportune time," the news channel reported. The RBI has made these disclosures to a parliamentary panel which is reviewing the note ban.
The Modi government announced demonetisation on 8 November, scrapping the ₹1000 and ₹500 notes in a bid to combat corruption and black money.
This revelation has sparked questions about RBI's autonomy. Former Reserve Bank Governor Y.V. Reddy has warned the RBI's role as an independent central bank is under threat. "The financial stability function should have been with a non-political set-up like Governor of RBI. Now, that initiative is gone to the government," he said.
In a seven-page note to the parliamentary panel, the RBI said, "The government, on 7th November, 2016, advised the Reserve Bank that to mitigate the triple problems of counterfeiting, terrorist financing and black money, the Central Board of the Reserve Bank may consider withdrawal of the legal tender status of the notes in high denominations of Rs 500 and Rs 1,000."
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