RBI board warned of short-term impact of note ban on economy

THE BOARD SAID THAT THE UNPRECEDENTED MOVE WILL NOT HAVE ANY MATERIAL IMPACT ON TACKLING THE BLACK MONEY MENACE

NEW DELHI: The Reserve Bank of India board, which included the present Governor Shaktikanta Das as a director, had warned of short-term negative impact of note ban on the country’s economic growth and observed that the unprecedented move will not have any material impact on t ackl i ng t he bl ack money menace.

The board, according to minutes of the meeting revealed by the central bank in an RTI reply, had met two-and-a-half hours before Prime Minister Narendra Modi in an address to the nation announced the demonetisation decision on November 8, 2016.

Curbing black money was one of the prime objectives of the shock move to junk old ₹500 and ₹1,000 notes, which saw 86% of high value currency going out of circulation.

The minutes of the board meeting, which approved the government’s r equest f or demonetisation, recorded the presence of the then RBI Governor Urjit Patel and the then economic affairs secretary Shaktik- anta Das. Others at the board meeting included the then financial services secretary Anjuli Chib Duggal, and RBI deputy governors R Gandhi and SS Mundra. Both Gandhi and Mundra are not part of the board now, while Das was appointed as the RBI governor in December 2018.

“It is a commendable measure but will have short-term negative effect on GDP for the current year,” as per the minutes posted by RTI activist Venkatesh Nayak on the website of Commonwealth Human Rights Initiative.

“Most of the black money is held not in the form of cash but in the form of real sector assets such as gold or real estate and that this move would not have a materi a l i mpact o n t hose assets,” the board observed in its 561st meeting held in Delhi.