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			The Reserve Bank of India (RBI) had warned that removing high-value cash was unlikely to stem black money because most of the ill-gotten wealth was stashed in assets such as gold and real estate.</div>
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			The 561st meeting of the board of the RBI was held on November 8, 2016, at 5.30 pm in New Delhi.&nbsp;</div>
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			Prime Minister Narendra Modi announced at 8 pm on the same day the government&rsquo;s intention to ban Rs 500 and Rs 1,000 notes.&nbsp;</div>
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			The share of the banned notes in the currency in circulation was about 86 per cent, amounting to about Rs 15.41 trillion.</div>
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			The minutes of the meeting were obtained under the Right to Information Act by activist Venkatesh Nayak, and hosted on the website of the Commonwealth Human Rights Initiative. The RBI has confirmed the minutes are genuine.</div>
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			The government&rsquo;s logic behind demonetisation was that there had been a steep rise in the circulation of Rs 500 and Rs 1,000 notes. The government said the economy had grown 30 per cent between 2011-12 and 2015-16, whereas the Rs 500 and Rs 1,000 notes had grown 76.38 per cent and 108.98 per cent, respectively.&nbsp;</div>
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			The government had quoted a white paper of the Department of Revenue, stating that cash facilitated black money transactions because it did not leave any audit trail. The government noted that counterfeiting was also on the rise and amounted to a purported value of Rs 400 crore.&nbsp;</div>
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			The RBI board was clearly not convinced by the government&rsquo;s argument, the minutes showed. &ldquo;Most of the black money is held not in the form of cash but in the form of real-sector assets such as gold and real estate and that this move would not have a material impact on those assets,&rdquo; the board of directors observed.</div>
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			&ldquo;The growth rate of the economy mentioned is the real rate, while the growth in currency in circulation is nominal. Adjusted for inflation, the difference may not be so stark. Hence, this argument does not adequately support the recommendation,&rdquo; the board had observed.</div>
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			Among other observations by the directors was that though demonetisation was a &ldquo;commendable measure&rdquo;, it would have a short-term negative effect on gross domestic product for &ldquo;the current year&rdquo; (2016-17).</div>
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			The counterfeiting of currency notes was a concern, but since its purported value was limited to Rs 400 crore, it was not very significant.</div>
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			The board was told the issue was discussed with the government for six months and most of the concerns raised by the board were considered. The board was assured the government would take &ldquo;mitigating measures to contain the use of cash&rdquo; as demonetisation presented a &ldquo;big opportunity to take the process of financial inclusion and incentivising use of electronic modes of payment forward as people see the benefits of bank accounts and electronic means of payments over use of cash&rdquo;.</div>
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			After deliberation, the board concluded that demonetisation was &ldquo;in the larger public interest&rdquo;. The resolution was signed by then governor Urjit Patel on December 15, 2016, more than a month after demonetisation happened.</div>
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			Patel chaired the meeting. Shaktikanta Das, current governor and then economic affairs secretary, was part of the meeting as government-appointed director. Then deputy governors R Gandhi and S S Mundra, too, were present and one of them moved the resolution on banning high-denomination notes. Anjuly Chib Duggal, Nachiket Mor, Bharat N Doshi, and Sudhir Mankad were present as directors.</div>
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			However, RBI board member Natarajan Chandrasekaran, then chief executive officer of Tata Consultancy Services and now chairman of Tata Sons, was not in the meeting.</div>
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				<strong>TAKING NOTE</strong></div>
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					Centre said rise in Rs 500 and Rs 1,000 notes much sharper than growth in economy</li>
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					Counterfeit currencies stood at Rs 400 crore, observed Centre</li>
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					Growth in currency was nominal and did not merit demonetisation</li>
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					RBI warned of short-term GDP hit</li>
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					Counterfeit was minuscule, compared to total currency in circulation</li>
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					Urjit Patel signed the demonetisation resolution 38 days after the currency purge</li>
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The share of the banned notes in the currency in circulation was about 86 per cent, amounting to about Rs 15.41 trillion

News digest: RBI move impact, payroll additions, US stocks fall, and more

RBI had warned govt against demonetisation hours before Modi's announcement

The share of the banned notes in the currency in circulation was about 86 per cent, amounting to about Rs 15.41 trillion