A proposal to ban Rs 500 and Rs 1000 had floated during UPA- II regime, former deputy governor of Reserve Bank of India (RBI) K.C. Chakrabarty said.
Chakrabarty, who served between June 2009 and March 2014 as RBI deputy governor said that the RBI declined the proposal back then since it does not serve any purpose. “The cost is high and the benefit is less,” he told The Hindu.
It had come from the UPA government. After examining the proposal, we had said that this should not be done. The proposal never went to the board level. We said ‘no’ because it does not serve any purpose. the cost is high and the benefit is lessK.C. Chakrabarty
He also said that there is no economic rationale behind the ongoing demonetisation drive since it can not bring any changes in the flow of black money in the country.
“What is black money? No notes are black. All notes are white. It is the process that creates the black money. When a person does not pay tax, it becomes black money. Here you are killing the notes and not the fellow who is not paying tax, ” he said.
He later explained the demonetisation drive through an example.
If you buy a kilo of rice, there will be some small stones (interspersed). What you do is remove those particles and not the entire rice. The law enforcement authorities should identify those notes and take action. Here people are standing in the queues to get their own money because there are inefficiencies with the income tax (process), police machinery etc.K.C. Chakrabarty
He also said that he does not know how the ruling government thinking and what information they have regarding the counterfeit. “
“If they have the information then they should tell the people. They must disclose, per million pieces of Rs.1,000, how many counterfeit notes there are,” he said.