India's central bank refused to share specific details of Prime Minister Narendra Modi's ban on high-value banknotes citing danger to life and national security, as the mystery deepens over who took the unprecedented decision.
The Reserve Bank of India recommended the move, which was accepted by the cabinet and announced by PM Modi on Nov. 8, Power Minister Piyush Goyal told parliament in November. The RBI board approved the ban three hours before PM Modi's speech and hadn't discussed the matter before, a slew of responses to Bloomberg News's Right to Information requests show.
However, the RBI told a lawmakers' panel this week that the government had "advised" the monetary authority to "consider" the ban a day before the RBI board made its recommendation. The government then "considered the recommendations" and decided to withdraw the notes, culminating in PM Modi's address that blindsided the nation.
The cloak of secrecy that has shrouded the currency ban decision is likely to bolster the view that authorities, both on Mint Street and in New Delhi, were not prepared for such a decision and the way it was announced. It risks undermining perceptions of the central bank's independence and raises questions about PM Modi's decision-making style and his communication with the RBI.
More clarity may emerge when RBI Governor Urjit Patel deposes before a parliamentary committee on Jan. 20. Details are essential to help assess the success of the shock move as well as gauge the impact of the decision on Asia's No. 3 economy.
"It is very perplexing that the RBI doesn't answer questions about how the decision was arrived at," said Shilan Shah, Singapore-based India Economist at Capital Economics. "There are concerns that in the whole process the RBI has been sidelined by the government and that raises questions about its independence," he said, adding that authorities have not been transparent.
Right to Information
Bloomberg News asked the RBI 14 questions between Dec. 8 and Jan. 2.
India's central bank refused to share specific details of Prime Minister Narendra Modi's ban on high-value banknotes citing danger to life and national security, as the mystery deepens over who took the unprecedented decision.
The Reserve Bank of India recommended the move, which was accepted by the cabinet and announced by PM Modi on Nov. 8, Power Minister Piyush Goyal told parliament in November. The RBI board approved the ban three hours before PM Modi's speech and hadn't discussed the matter before, a slew of responses to Bloomberg News's Right to Information requests show.
However, the RBI told a lawmakers' panel this week that the government had "advised" the monetary authority to "consider" the ban a day before the RBI board made its recommendation. The government then "considered the recommendations" and decided to withdraw the notes, culminating in PM Modi's address that blindsided the nation.
The cloak of secrecy that has shrouded the currency ban decision is likely to bolster the view that authorities, both on Mint Street and in New Delhi, were not prepared for such a decision and the way it was announced. It risks undermining perceptions of the central bank's independence and raises questions about PM Modi's decision-making style and his communication with the RBI.
More clarity may emerge when RBI Governor Urjit Patel deposes before a parliamentary committee on Jan. 20. Details are essential to help assess the success of the shock move as well as gauge the impact of the decision on Asia's No. 3 economy.
"It is very perplexing that the RBI doesn't answer questions about how the decision was arrived at," said Shilan Shah, Singapore-based India Economist at Capital Economics. "There are concerns that in the whole process the RBI has been sidelined by the government and that raises questions about its independence," he said, adding that authorities have not been transparent.
Right to Information
Bloomberg News asked the RBI 14 questions between Dec. 8 and Jan. 2.
India's central bank refused to share specific details of Prime Minister Narendra Modi's ban on high-value banknotes citing danger to life and national security, as the mystery deepens over who took the unprecedented decision.
The Reserve Bank of India recommended the move, which was accepted by the cabinet and announced by PM Modi on Nov. 8, Power Minister Piyush Goyal told parliament in November. The RBI board approved the ban three hours before PM Modi's speech and hadn't discussed the matter before, a slew of responses to Bloomberg News's Right to Information requests show.
However, the RBI told a lawmakers' panel this week that the government had "advised" the monetary authority to "consider" the ban a day before the RBI board made its recommendation. The government then "considered the recommendations" and decided to withdraw the notes, culminating in PM Modi's address that blindsided the nation.
The cloak of secrecy that has shrouded the currency ban decision is likely to bolster the view that authorities, both on Mint Street and in New Delhi, were not prepared for such a decision and the way it was announced. It risks undermining perceptions of the central bank's independence and raises questions about PM Modi's decision-making style and his communication with the RBI.
More clarity may emerge when RBI Governor Urjit Patel deposes before a parliamentary committee on Jan. 20. Details are essential to help assess the success of the shock move as well as gauge the impact of the decision on Asia's No. 3 economy.
"It is very perplexing that the RBI doesn't answer questions about how the decision was arrived at," said Shilan Shah, Singapore-based India Economist at Capital Economics. "There are concerns that in the whole process the RBI has been sidelined by the government and that raises questions about its independence," he said, adding that authorities have not been transparent.
Right to Information
Bloomberg News asked the RBI 14 questions between Dec. 8 and Jan. 2.
- The central bank as of Jan. 11 had answered five, disclosing the date and time of the RBI's board meeting and the fact that the board had never discussed demonetization before Nov. 8
- It said it doesn't have information to answer one question, on how many of the worthless notes have been deposited at commercial banks
- It transferred two questions on printing of new notes to organizations that manage the presses
- The RBI said that a question asking "what prompted the board to discuss and approve the withdrawal of notes" doesn't come under the definition of "information" under the RTI Act
- It provided different answers to a question asked three times, seeking details on board members who opposed the move. In two replies the RBI said "it is a matter of fact that the decision was unanimous." In a separate response, it said "this information is not available on record"
- To a question seeking details on the number of demonetized notes already at banks on the evening of PM Modi's speech, the RBI claimed an exemption, citing danger to the life or physical safety of anyone who disclosed this information to the public
- The RBI also claimed exemptions on two questions seeking detail on its preparations for the demonetization and studies it used to forecast the impact of the move. Sharing these "sensitive matters" would endanger India's sovereignty, integrity and security, according to the RBI
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