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First discussed note ban with RBI in Feb 2016: Shaktikanta Das

It is learnt that Das told the panel that a discussion between the government and RBI started, at a very high level, in February 2016.

Written by Anand Mishra | New Delhi |
February 21, 2017 4:53:12 am
Shaktikanta Das, Economic Affairs Secretary, demonetisation, demonetisation news, demonetisation RBI, remonetisation, raghuram rajan, india news When Sukhendu Sekhar Roy of Trinamool Congress asked him to give a copy of the letter, Das promised to furnish the “extract” of the letter in a written reply.

The government has told a Parliamentary panel that it discussed the idea of announcing the demonetisation of Rs 1,000 and Rs 500 notes in the Union Budget speech for 2016-17 but decided against it because such a move “requires a lot of preparation”. Briefing the Public Accounts Committee (PAC) on February 10, Secretary, Economic Affairs, Shaktikanta Das also said that before the government asked banks on November 15 to apply indelible ink marks on fingers of people in queues to exchange demonetised notes, the idea had come up for discussion but it too was dropped because it was “too intrusive”.

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Asked why notifications were repeatedly issued after the November 8 demonetisation announcement, Das told the PAC that it was an “evolving situation” and while the government had anticipated problems, “some of the problems could not be anticipated”.

It is learnt that Das told the panel that a discussion between the government and RBI started, at a very high level, in February 2016. Raghuram Rajan was then the Governor of RBI.

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“In fact during the Budget preparation last year, a suggestion had come and it was discussed whether this could be something, which can be announced in the Budget speech. But then very quickly, it was realised that this requires a lot of preparation to make the process of demonetisation and remonetisation as smooth as possible,” he is said to have told the panel.

From March and April 2016 onward, the RBI and government, had very active, internal discussions, Das told the panel. So when the government made a reference to the central bank on November 7, requesting it to place the matter before the RBI central board for consideration, “it was not a surprise for RBI” since the letter sent on January 7 was “preceded by months of discussion” and that senior officers of the RBI at the highest level were aware of it”.

When Sukhendu Sekhar Roy of Trinamool Congress asked him to give a copy of the letter, Das promised to furnish the “extract” of the letter in a written reply.

The RBI considered the matter at a meeting of its central board on November 8 and gave its nod, hours before Prime Minister Narendra Modi announced the demonetisation decision.

On developments in the government that day, Das said a lot of advance action had been taken and officers were told to be ready though they did not know about the decision. He is learnt to have told the panel that about ten Joint Secretaries had assembled in his room for a review meeting on November 8 evening but did not know the purpose.

“The Additional Secretary was taking that review meeting. After this announcement was made by the Prime Minister, we formed a committee of these Joint Secretaries and tasks were assigned to these Joint Secretaries to coordinate with various state governments to look after ATM supplies and other aspects of the remonetisation process. Letters were immediately issued to all state governments, to their Chief Secretaries and to their DGPs,” Das told the panel.

Das, Revenue Secretary Hasmukh Adhia and Secretary, Financial Services, Anjuly Chib Duggal appeared before the PAC headed by Congress leader K V Thomas.

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