Don't ban high-value notes, RBI warned Modi govt at 5:30pm; At 8:00 pm, PM announced demonetisation

The Reserve Bank of India’s 561st meeting holds a key detail that shows how Narendra Modi government went ahead with the note ban decision despite clear dissent. The minutes of the meeting have revealed how the Central bank had differed with Modi govt over the landmark decision. According to a report in Business Standard, on November 8, 2016, the RBI had told the govt that it must not ban the high-value currency notes as it won’t help in curbing black money economy. This was at 5:30 pm. Two and a half hours later, at 8 pm, Prime Minister Narendra Modi announced demonetisation that would ban the Rs 500 and Rs 1000 currency notes.

The minutes of the meeting were obtained under an RTI filed by Venkatesh Nayak. The RBI has confirmed that the details are genuine. At that time, the share of banned notes in circulation was 86%.

Apart from this, the RBI also said that it has no data on the old 500 and 1,000 rupee notes used to pay for utility bills such as fuel at petrol pumps -- payments that are anonymous and are believed to have formed a good part of the demonetised currency that returned to the banking system.

After the November 8, 2016 shock decision to ban the use of old 500 and 1,000 rupee notes, the government had allowed the exchange of the junked notes as well as they being used for payment of utility bills for 23 services.

Both 500 and 1,000 rupee notes could be used at government hospitals, railway ticketing, public transport, airline ticketing at airports, milk booths, crematoria/burial grounds, petrol pumps, metro rail tickets, purchase of medicines on doctor prescription from the government and private pharmacies, LPG gas cylinders, railway catering, electricity and water bills, ASI monument entry tickets and highway toll.

On November 25, 2016, the exchange of old notes was stopped and the government allowed the use of only old 500 rupee notes at these utilities till December 15, 2016.