RBI Okayed Note Ban But Said It Won’t Help In Curbing Black Money & Counterfeit Notes: Report

The minute of the meeting held before demonetisation shows that the Central Board of The Reserve Bank Of India approved the demonetisation of Rs 500 and Rs 1000 but also raised objections to the point that it will help curb black money and check the flow of counterfeit notes reported The Indian Express.

The objections raised are important considering that PM Modi in his speech on November 8 said that the note ban was aimed at destroying black money and the business of counterfeit notes.

In the 561st RBI Board meeting which was summoned at 5:30 PM, just 4 hours before PM Modi announced demonetisation, in New Delhi, the bank director’s commended the move but also warned that demonetisation “will have a short-term negative effect on the GDP for the current year”.

The minutes of the meeting was signed by RBI Governor Urijit Patel on December 15, 2016, and six significant objections were raised by RBI Board.

The highlights of the meetings as per the Indian Express report:

1. Counterfeit notes: “While any incidence of counterfeiting is a concern, Rs 400 crore as a percentage of the total quantum of currency in circulation in the country is not very significant”.
2. On black money, the board noted: “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…this move would not have a material impact on those assets.”
3. The move will have adverse effects on tourism and medical sectors
4. The move will push for financial inclusion and digital payment

“The proposed step also presents a big opportunity to take the process of financial inclusion and incentivising use of electronic modes of payment forward as people can see the benefits of bank accounts and electronic means of payment over the use of cash…”

The minutes of the meeting also mentioned that the issue of ‘demonetisation’ and the other concerned issues was being discussed for the last six months.

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Also Read: BJP Obstructs Parliamentary Panel Report On The Impact Of Demonetisation