The demonetisation of India’s Rs 500 and Rs 1,000 notes reopened the debate over the central bank’s autonomy. Indeed, the See Central bank. of India’s (RBI) independence from the government has been questioned for decades, and many people including former RBI governors, wonder if the central bank had a say in the withdrawal of those two denominations. Moreover, the appointment of a joint secretary responsible for coordinating Money in physical form such as banknotes and coins. operations at the RBI by the Ministry of Finance has been very badly received among RBI employee unions.
Nevertheless, this sort of collaboration between the RBI and the government is expressly authorized in the RBI Act, which states that the government is allowed to give directions to the bank if it is in the public interest and after consultation with the governor. Conversely, the government may declare that any See Family of banknotes. shall cease to be Money that is legally valid for the payment of debts and must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt. by notification in the Gazette of India upon recommendation of the central bank.
A large part of the population was disappointed by the docility of the RBI and would have preferred that it resist or at least discuss the move decided by the government – even though many wonder if the central bank even has the power to oppose such a decision.
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