Govt 'advice' drove note ban: Poll says RBI image hit

Moneycontrol BureauThe RBI’s credibility as an institution has been undermined by the central bank’s admission that it had recommended demonetization on the government’s advice, feel 64 percent of moneycontrol viewers who participated in a poll on the issue. http://t.in.com/d5uiIn all, 1786 viewers participated in the poll, with 1147 voting ‘yes’ to the question whether RBI’s authority had taken a  beating. On the message board, 42 viewers posted comments.“It is not that the currency has been demonetized; it is the RBI as an institution that has been devalued,” wrote message board member Narasimhan.“The scheme could have been implemented in a much better and systematic way than as it has been done,” wrote angryoldman68.Anandoj wrote: “To soon to tell but I agree with YV Reddy’s view that we need to protect the RBI’s independence which was compromised even before this government took over.Those who felt the RBI's credibility remained untarnished said the central bank could not have taken such a drastic step on its own and required a "bold" intervention from the government.On Twitter, the response to the question was mixed. Off the 342 tweeters who voted, 52 percent felt RBI’s credibility had taken a beating, against 48 percent who felt it had not.On November 8, Prime Minister Narendra Modi had announced that the Rs 500 and Rs 1,000 currency notes would be discontinued from midnight the next day in an attempt to crack down on black money. It was initially believed that the move was prompted by the country’s central bank. Some ministers, too, had maintained the government had acted on the RBI’s recommendation.But it has now emerged that the government had “advised’’ the RBI to junk the notes.In a seven-page note to Parliament's Department-Related Committee of Finance headed by Congress leader M Veerappa Moily, the RBI stated that the government had on November 7 "advised the Reserve Bank that to mitigate the triple problems of counterfeiting, terrorist financing and black money, the Central Board of the Reserve Bank may consider withdrawal of the legal tender status of the notes in high denominations of Rs 500 and Rs 1,000.The RBI's Central Board met the very next day and recommended demonetisation.