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Demonetisation Decision Was Taken In May 2016 But Minutes Of The Meetings Were Not Maintained For Secrecy, Says Urjit Patel

New twist?

19/01/2017 8:14 AM IST | Updated 19/01/2017 10:08 AM IST
INDRANIL MUKHERJEE via Getty Images
In this photograph taken on November 30, 2016, a handwritten sign stating 'no cash' is hung onto door of an ATM in Mumbai.

Reserve Bank of India Governor Urjit Patel has reportedly told the Parliamentary standing committee on finance that the "actual decision" to demonetise notes was taken around 27 May last year. The RBI and government had been in talks since January, but there were no minutes of the meetings maintained to ensure total secrecy, reported The Times of India.

Patel appeared before the Parliamentary Standing Committee on Finance on Wednesday, along with other RBI and finance ministry officials.

Danish Siddiqui / Reuters
The Reserve Bank of India (RBI) Governor Urjit Patel speaks during a news conference after the bi-monthly monetary policy review in Mumbai, India, October 4, 2016. REUTERS/Danish Siddiqui/File Photo

Patel reportedly told the panel that the RBI and central government had been in "regular touch" since last January over the demonetisation of ₹500 and ₹1,000 notes and the printing of new ones to replace them. According to the TOI report, his comments elaborated on the background note already provided by the central bank to the parliamentary panel.

Interestingly, if the decision to demonetise notes was made in May last year, this would mean it former RBI governor Raghuram Rajan was part of this decision-making process. Patel was appointed as Governor only in August last year.

Patel is believed to have escaped grilling over questions on when normalcy will be restored thanks to former PM Manmohan Singh, who is a former RBI Governor and part of the panel. Patel also reportedly told the panel that the central bank has replaced about ₹9.2 lakh crore in new currency, which is about 60% of the displaced currency due to demonetisation.

Hindustan Times via Getty Images
People stand in a queue outside banks to deposit and exchange old denomination Indian rupee 500 and 1000 currency notes, at Barakhamba Road, on November 24, 2016 in New Delhi, India.

The decision to demonetise ₹500 and ₹1,000 notes was announced by PM Modi on 8 November, which wiped out an estimated 86% of the cash in India. With enough new notes not in circulation, it resulted in serpentine queues in front of banks and ATMs every day (and sometimes through late night and early morning) of people waiting to deposit the old notes and withdraw new ones. Dozens of deaths were reported in these queues, including those of bank employees, fuelling public anger.

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