Reserve Bank Cleared Notes Ban Less Than 3 Hours Before PM Modi's Speech on Nov 8

The board of India's central bank approved the move to ban high-denomination notes less than three hours before Prime Minister Narendra Modi announced the decision in a televised address to the nation. 

Information on how many members favored or opposed the move isn't "on record," the Reserve Bank of India said in response to queries from Bloomberg News under the Right to Information Act. Power Minister Piyush Goyal had told lawmakers on Nov. 16 that it was the authority's 10-member board that came up with the idea. 

PM Modi's surprise Nov. 8 decision to withdraw 86 percent of bank notes in circulation has squelched demand for goods and services in Asia's third-largest economy, where cash dominates transactions. The RBI has been criticized for a lack of preparedness and numerous policy U-turns that contributed to the ensuing chaos. Questions have also been raised about the central bank's independence and communication policy under the leadership of Governor Urjit Patel. 

The decision to withdraw the legal tender character of the 500 ($7.3) and 1000 rupee notes to the central government was taken at 5:30 p.m. on Nov. 8 at a board meeting, the RBI said in its responses.

The bank's board consists of Governor Patel, his three deputies -- R Gandhi, S.S. Mundra and N.S. Vishwanathan -- along with a host of eminent personalities including the Economic Affairs Secretary Shaktikanta Das. 

It remains unclear what kind of preparations the RBI made for the currency ban that caused chaos across India: it did not respond to queries on how many new 2,000 and 500 rupee notes were being printed each day in its mints or the number of hours each day the printing presses were working in the month leading up to the Nov. 8 announcement. 

Nearly 50 days after the decision, there is still a shortage of cash in circulation, with ATMs regularly running out of money and a 2,500 rupee per day cap on ATM withdrawals. 

"The RBI top management must communicate more through the media and speaking opportunities," former Deputy Governor Usha Thorat wrote in an opinion piece on Wednesday in the Indian Express. "This is necessary in the interest of transparency and credibility. It generates confidence that the RBI believes in honest communication."

© 2016 Bloomberg L.P.