27/11/2016 8:04 AM IST | Updated 27/11/2016 8:11 AM IST

₹500, 1000 Notes Banned On RBI Suggestion, Says Ravi Shankar Prasad

"It is not demonetisation in classical economic sense."

Bloomberg via Getty Images

NEW DELHI -- Law and IT Minister Ravi Shankar Prasad on Saturday said the decision to scrap ₹500/1000 notes was taken by the government on the recommendation of the Reserve Bank of India.

"It is not demonetisation. It is a wrong expression. Our government has only taken decision upon recommendation of Reserve bank of India who is authority to take decisions that notes of ₹500 and ₹1000 will not be a legal tender. It is not demonetisation in classical economic sense," he said.

Government scrapped acceptance of old ₹500 and ₹1000 notes from 9 November onward but allowed their payment for some essential services in limited manner.

Listing out steps taken by the NDA government to deal with menace of unaccounted money at an event of PHD Chamber of Commerce and Industry, Prasad said Prime Minister Narendra Modi created SIT on black money in the very first Cabinet meeting.

The government re-negotiated double taxation treaties with Mauritius and Cyprus, and bankruptcy code was brought in.

India also entered into an agreement with the US under FATCA.

"Then, provision under Income Tax was made to disclose black money and pay penalty, then voluntary disclosure income scheme was brought, then benami transaction rule was brought in. The decision of putting ₹500 and ₹1000 out of legal tender was last of these," Prasad said.

He said that country's economy has 12-13% cash component out of which ₹500 and ₹1000 account for 86%.

"Now this country is moving towards honesty and transparency let it move in that direction. Now it is our duty to bring India out of corruption taint," Prasad said.

The minister further said due to economic reforms government has saved ₹36,000 crore by digitalising economic activities such as payment of subsidies and MGNREGA wages through direct cash benefit facilities on to the accounts of intended beneficiaries through Aadhaar.

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