RBI approved cash ban just hours before Modi’s speech

mumbai — The board of India’s central bank approved the move to ban high-denomination notes less than three hours before Prime Minister Narendra Modi announced the decision in a televised address to the nation.

Information on how many members favoured or opposed the move isn’t “on record,” the Reserve Bank of India said in response to queries from Bloomberg News under the Right to Information Act.

Power Minister Piyush Goyal had told lawmakers on November 16 that it was the authority’s 10-member board that came up with the idea.

Modi’s surprise November 8 decision to withdraw 86 per cent of bank notes in circulation has squelched demand for goods and services in Asia’s third-largest economy, where cash dominates transactions.

The Reserve Bank of India has been criticised for a lack of preparedness and numerous policy U-turns that contributed to the ensuing chaos.

Questions have also been raised about the central bank’s independence and communication policy under the leadership of Governor Urjit Patel.

The decision to withdraw the legal tender character of the 500 ($7.3) and 1,000 rupee notes to the central government was taken at 5.30pm on November 8 at a board meeting, the RBI said in its responses.

The Reserve Bank if India’s board consists of Governor Patel, his three deputies — R. Gandhi, S.S. Mundra and N.S. Vishwanathan — along with a host of eminent personalities including the Economic Affairs secretary Shaktikanta Das.

It remains unclear what kind of preparations the central bank made for the currency ban that caused chaos across India: it did not respond to queries on how many new 2,000 and 500 rupee notes were being printed each day in its mints or the number of hours each day the printing presses were working in the month leading up to the November 8 announcement.

Nearly 50 days after the decision, there is still a shortage of cash in circulation, with ATMs regularly running out of money and a 2,500 rupee per day cap on ATM withdrawals.

“The RBI top management must communicate more through the media and speaking opportunities,” former deputy governor Usha Thorat wrote in an opinion piece on Wednesday in the Indian Express.

“This is necessary in the interest of transparency and credibility. It generates confidence that the Reserve Bank of India believes in honest communication.”

10 members of the RBI board took the big decision at 5.30pm on November 8