Updated 8:04 am, Apr 28, 2021

Demonetisation: RBI ready to give House panel details of Nov 8 meet, Urjit Patel answers questions | SNE

Apr 27, 2017

Mumbai: RBI Governor Urjit Patel during a press conference after monetary policy review meeting in Mumbai on Wednesday. PTI Photo by Shashank Parade (PTI2_8_2017_000191B)

HAVING THUS far refused to disclose minutes of the meeting of its central board, held hours before Prime Minister Narendra Modi announced demonetisation of Rs 1,000 and Rs 500 on November 8 last year, the Reserve Bank of India (RBI) has finally agreed to submit the minutes before a Parliamentary panel “in a sealed cover”.

RBI Governor Urjit Patel is learnt to have submitted a 15-page note — of answers to questions asked by members — to the department-related Committee on Finance, headed by senior Congress MP M Veerappa Moily. The answers were recently circulated among the panel members.

In a written response to a question by Congress member Jyotiraditya Scindia on why the central bank has refused to disclose minutes of the meeting, and why it has refused to make public the reasons behind the sudden announcement by Modi on the evening of November 8, Patel said, “The minutes of the RBI Board meetings are generally not published. However, if so desired by the Committee, the same can be submitted to the Committee in a sealed cover”.

The RBI had so far cited the RTI Act’s Section 8(i) – it bars disclosure of information that can “prejudicially affect sovereignty and integrity of India, security, strategic, scientific or economic interests of the state”, among others – while turning down multiple RTI appeals seeking details of the crucial meeting.

Patel had appeared before the House panel on January 18 and had faced a barrage of questions on the issue. He is scheduled to appear before it again on May 25.

Earlier, in a seven-page note submitted to the panel on December 22, 2016, the RBI had stated, “(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”.

According to that note, the RBI central board met on November 8 to “consider the government’s advice” and, after “deliberations”, decided to recommend that legal tender status of banknotes in the “denominations of Rs 500 and Rs 1000 be withdrawn”. During the January 18 meeting, Patel was asked whether those discussions between RBI and the government, which he says had started from January 2016, were regarding demonetisation or on issuing of new notes.

Scindia had said that if the discussions were regarding demonetisation, then Patel’s predecessor, Raghuram Rajan, must also have been taken into confidence. If that is the case, Scindia said, Patel should release the minutes of those conversations with Rajan. Patel, who took over as RBI Governor on September 5 last year, stated as part of his 15-page reply that “no such minutes of conversations with the previous RBI Governor are on record”.

Asked whether the RBI acted unilaterally in recommending demonetisation, or whether it was on the basis of an advice, a letter or a demand made by the Centre, Patel reiterated that the RBI board met on November 8 to “consider the government’s advice”. Asked whether the apex bank could anticipate the impact of demonetisation not only on money supply but, importantly, on wages, jobs, consumer spending and the overall economy, Patel replied that while RBI was conscious of the likely short-term impact on the economy, the impact was assessed to be transitory in view of the planned remonetisation programme and other steps envisaged.

On the RBI’s rationale for demonetisation, Patel said while the Centre stated that withdrawal of these notes could be a solution to the menace of counterfeiting, and financing of subversive activities, the RBI found that counterfeits of these denominations have largely been in circulation, and that it was becoming increasingly difficult to identify genuine notes from counterfeit ones. Through demonetisation, Patel said, “RBI saw an opportunity to put an end to the menace of counterfeit notes”.

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