‘Did RBI inform govt of impact on circulation?’: SC asks govt on demonetisation

Under the Reserve Bank of India (RBI) Act Section 26(2), a recommendation by the RBI’s Central Board precedes any decision to demonetise any series of currency notes.

The Supreme Court on Friday asked the central government if the Reserve Bank of India (RBI) had informed it that demonetisation will result in the withdrawal of over 86% currency in circulation.

The Supreme Court. (ANI)

Making a query to the Centre as part of its consideration of a bunch of petitions challenging the November 8, 2016 notification, a five-judge Constitution bench said, “Did the RBI inform Government that 86.4% currency would be withdrawn from circulation? This was an enormous action.”

Under the Reserve Bank of India (RBI) Act Section 26(2), a recommendation by the RBI’s Central Board precedes any decision to demonetise any series of currency notes.

At the time of the note ban, ₹17.97 lakh crore currency was in circulation, of which, the demonetised bank notes valued ₹15.44 lakh crore — constituting 86.4% of the currency in circulation, according to data produced by Congress leader and senior advocate P Chidambaram on Thursday. Of this 98.9% demonetised notes came back, valuing ₹15.31 lakh crore, he added.

Limiting its scrutiny to what weighed with the Centre in arriving at the decision, the bench headed by Justice S Abdul Nazeer said, “If this was informed (by RBI), we would like to know whether the Government would have done it or not.”