Why we should demand disclosure of RBI Board minutes than mere MPC minutes…

More and more skeletons are coming out of the cupboard.

We are told that RBI Board advised the government to withdraw currency notes of Rs 500 and Rs 1000 denomination.

Now, the central bank itself seems to have told the Parliamentary Committee that they  acted on the government advice:

According to RBI’s note, accessed by The Indian Express, the RBI Central Board met the very next day to “consider the Government’s advice,” and after “deliberations,” decided to recommend to Central Government that the legal tender status of the banknotes in the high denominations of Rs 500 and Rs 1000 be withdrawn.” The Government “considered the recommendations” and decided to withdraw the notes. That same evening, Prime Minister Narendra Modi addressed the nation and announced the decision to withdraw the notes effective midnight November 8.

Eight days later, during a debate on demonetisation in the Rajya Sabha, Union Minister for Power, Coal, New and Renewable Energy Piyush Goyal said that the decision to demonetise was taken by the RBI Board.

“Reserve Bank ke Board ne yah nirnay liya. Isko Sarkar ke paas bheja aur sarkar ne is nirnay ki sarahna karte hue, cabinet ne ise manjoori di ki paanch sau or hazar ke purane noton ko radd kiya jaaye, naye notes aaye (The Board of Reserve Bank took this decision, sent it before the government and with the government endorsing it, Cabinet gave its nod to it to demonetise the old currency notes of Rs 500 and Rs 1000 and bring new notes),” Goyal had said.

In its note, the RBI, under the heading “Background” and “Preparations,” said: “It occurred to Government of India and the Reserve Bank that the introduction of new series of notes could provide a very rare and profound opportunity to tackle all the three problems of counterfeiting, terrorist financing and black money by demonetising the banknotes in high denominations of Rs 500 and Rs 1000 or by withdrawing legal tender status of such banknotes…Though no firm decision was taken initially, whether to demonetise or not, preparations still went on for introduction of new series notes, as that was needed in any case.”

It is stupid to think at the first place that the central bank board could have taken the decision. It had to be a government decision and the central bank board just acted on the same.

In another RTI reply, it is revealed that the decision to take out Rs 2000 was taken in May itself:

The Reserve Bank of India (RBI) has said that its Central Board approved the proposal to issue new notes of the denomination of Rs 2,000 as early as May 2016, a fact it mentions in its note to the Standing Committee on Finance, but adds that there was no discussion on a possible withdrawal of Rs 500 and Rs 1,000 notes at its board meetings in May or July or August.

In its Right to Information (RTI) reply to an application filed by The Indian Express, the RBI said the Central Board discussed and approved the proposal to introduce Rs 2,000 notes on May 19 last year.

To a specific question on whether there was a discussion on a possible withdrawal of legal tender of the Rs 500 and Rs 1,000 notes at any of the board meetings of the RBI last year, the RBI said that this was not discussed during the May 2016 Board meeting or the subsequent Board meetings on July 7 and August 11.

RBI Board meeting was held on 19 May 2016. All the The press release says is:

The Central Board also discussed and recommended to the Government a set of designs for the new banknotes series which, on approval from the Government, will be introduced in due course.

There is no mention of Rs 2000 note at all!

I mean how crazy all this is becoming? Based on the RBI act, this should have been disclosed in May-2016 itself. Why did the government/RBI notify it as late as 8 Nov 2016 night?

Increasingly things are becoming both clearer and murkier. We should demand RBI to disclose and reveal the minutes of Central Board meetings at a very detailed level. Simple press releases will not do as they hardly tell you anything. But then there is only so much that minutes can reveal. If policymakers decide things secretly and not discuss it in the meeting, nothing can be done. But hopefully things like Rs 2000 note denomination etc would have been revealed.

This is what libertarians have always feared against centralisation of any policy. A few people decide the fate of the country amidst least transparency. Even worse is they tell us how things are becoming more transparent as in India’s central bank case by doing things like inflation targeting, MPC minutes and so on.

Update:

As I wrote this post, came another article which said this time PMO refused to give details under RTI. The PMO was asked on who were consulted for the 8 Nov 2016 decision. Earlier, RBI refused the same query as well.

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