Ex-central bank head says he didn't support rupee notes ban

This article is more than 12 months old

MUMBAI India's former central bank head Raghuram Rajan had told the government that short-term costs of a radical ban of high-value currency notes would outweigh the long-term benefits, Times of India newspaper reported yesterday.

The report cited excerpts from Mr Rajan's book on his stint at the Reserve Bank of India (RBI), I Do What I Do: On Reforms Rhetoric And Resolve.

That was before Prime Minister Narendra Modi stunned the country on Nov 8 by abolishing 500- (S$10.60) and 1,000-rupee notes, removing 86 per cent of the currency in circulation in a bid to crack down on the "shadow economy".

Following the ban, Indians suffered severe cash shortages which led to detrimental knock-on effects on the economy.

"The RBI flagged what would happen if preparation was inadequate," the paper cited Mr Rajan as saying in the book that will be released next week.

He also told the newspaper that the demonetisation had a disruptive impact, but the intent behind it was good.