Raghuram Rajan, the former RBI governor has stated that the demonetisation project never received his favour and that the central government was aware of the damage of pulling 86% cash off the system.
"At no point during my term was the RBI asked to make a decision on demonetisation," admits the former governor, in his book 'I Do what I do'.
Rajan was first asked about demonetisation in August 2014 when during a public lecture he was asked his opinions on invalidating high-denomination currency notes.
It was during February 2016 that the government sought his views on pulling back the currency notes, which he suggests that he gave it verbally, stating that there may be some long-term benefits, but no short-term gains.
"Although there might be long-term benefits, I felt the likely short-term economic costs would outweigh them and there were potentially better alternatives to achieve the main goals. I made these views known in no (rpt) no uncertain terms," he writes.
He further also reveals that the RBI handed over a note to the government outlining the potential cost and benefits of demonetisation as well as alternatives to achieve similar aims. The note also suggested the preparation that would be needed and the time it would require.
"The RBI flagged what would happen if preparation was inadequate," he added further.
The RBI, which had shied away from declaring how much of junked currency was deposited in banks, last week in its annual report declared 99% currency had returned.
Rajan said: "If the government, on weighing the pros and cons, still decided to go ahead with demonetisation, the note outlined the preparation that would be needed and the time that the preparation would take. The RBI flagged what would happen if preparation was inadequate."
According to Rajan, the deputy governor in charge of currency attended most central government meetings which were organized after a committee to consider currency issues was constituted. Rajan maintains in the book by suggesting that "at no point during my term was the RBI asked to make a decision on demonetisation".