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What RBI Governor Told Members of Parliament on Demonetisation

New Delhi: Reserve Bank of India and Finance Ministry officials met the Parliamentary standing committee on Finance on Wednesday to place on record their views about demonetisation and to answer questions by MPs.

Here are some interesting facts about the preparations for note ban, culled from the proceedings, a copy of which is in possession of News18.

· On October 7, 2014, the RBI suggested to the government the need to introduce Rs 5,000 and Rs 10,000 notes, keeping in mind inflation.

· On May 18, 2016, the government gave its assent for the introduction of a new Rs 2,000 note.

· On May 27, 2016, the RBI recommended that a new series of banknotes with new designs, sizes, colours and themes be introduced.

· Government gave its final approval on June 7, 2016, and the printing presses were advised to initiate production the same month.

· It was decided to print large quantities of Rs 2,000 notes so that when the stock of new notes reached a critical minimum, a decision to withdraw the legal tender could be made.

· On November 7, 2016, the government advised the RBI central board to consider withdrawing legal tender status from 500 and 1,000 rupee notes.

· The board met on November 8, 2016 and after deliberations recommended that legal tender status from the said banknotes should be withdrawn.

· The government cited counterfeiting, terrorist financing and black money as reasons for withdrawing the notes and the RBI thought the time was “opportune” to withdraw old notes and introduce the new ones.

· The RBI’s assessment was that the costs of demonetisation would be “transitory” while the benefits would be greater. The RBI thought the benefits outweighed the costs.

· The arrangements for printing the new notes started months back.

· Between November 9, 2016, and January 13, 2017, Rs 9.1 lakh crore in new notes have been introduced into the economy.

Source: News18