A note prepared by the Reserve Bank of India (RBI) that indicates it was the government that “advised” it to consider demonetisation of ₹500 and ₹1,000 currency notes — rather than the other way around — has raised questions about the autonomy of the central bank while drawing the ire of opposition parties.
“Section 26(2) of the RBI Act says that on the recommendation of the RBI, the government may demonetise a particular series of a currency note,” Congress spokesperson and former Union Minister Manish Tewari told The Hindu on Tuesday, stressing, “A strict reading of the Act, therefore, makes it plain that it does not give the RBI the power to demonetise an entire denomination, and the RBI has done a command performance without basic application of mind. It is a sad commentary on the inability of the central bank to maintain its autonomy.”
‘RBI pressured’
CPI(M) general secretary Sitaram Yechury, too, was scathing in his criticism. “This exposes the bluff of the government that this was an RBI decision. This was a government decision. The RBI was pressured to endorse it. And that explains the RBI’s flip flops ever since,” he told The Hindu . Another CPI(M) Politburo member, Brinda Karat, said, “This is an example of a lack of transparency and the snatching away of the autonomy of the RBI. The government is destroying institutions. It is also a case of a straight lie. The government must give an answer.”
CPI leader D. Raja also expressed concern over the reports. “The RBI willingly agreed to undermine its autonomy on monetary policy. The promise on the notes is that of the RBI Governor, not of the government. We do not know whether it agreed or not with the government on this. This is an attack on the autonomy of the RBI,” he said.
This criticism comes in the wake of reports that the RBI, in a seven-page note submitted on December 22 to the Parliamentary Standing Committee on Finance, headed by Congress leader M. Veerappa Moily, had said, “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 ₹500 and ₹ 1,000.”
To depose before panel
RBI Governor Urijit Patel and senior officials of the Finance Ministry were meant to depose before the parliamentary panel at its next meeting, earlier scheduled for January 11, but it has now been postponed to January 18, because of Pongal celebrations. This gives the government and the RBI some breathing space to answer some difficult questions.
