RBI & note ban

HT, 24 Dec 2016, Kolkata: Prime Minister Modi had convened a meeting of his cabinet later in the day when they were told about the decision. The ministers — who had to leave their mobile phones outside — were told to stay back till his address was telecast. It isn’t that the RBI or the government hadn’t been making preparations for the mammoth notes recall exercise. The bank had already printed Rs 4.94 lakh crore in Rs 2,000 notes by November 8.

But former RBI officials said this implies that the board’s approval was a formality.

One of them said he was concerned at the large number of vacancies in the central board. Of the 14 independent directors, the board has just four. “According to the RTI reply, only three of them were present (at the meeting). That is the quorum.”

The way the demonetisation decision was taken was “highly irregular”, said a former top RBI official, who didn’t wish to be named. He said he did not believe the government and RBI had taken “adequate steps” to minimise harassment of people.

The government’s shock move has led to a severe cash crunch, forcing millions of people to line up at banks and ATM kiosks for more than a month. Cash withdrawals have been restricted, but most banks are unable to provide even that. The Opposition’s protests over the demonetisation move have washed out the winter session of Parliament.