Note ban a money laundering scheme, says Chidambaram

On the second anniversary of demonetisation, former Union finance minister P Chidambaram dubbed the note ban exercise as an ingeniously-designed official money laundering scheme.

Speaking to reporters in Kolkata on Thursday, Chidambaram claimed that since the government was facing the prospects of a fiscal deficit crisis it has demanded Rs 1 lakh crore from the RBI reserves.

He also claimed that after the RBI governor refused to accept the demand, the government is planning to invoke Section 7 of the RBI Act.

“In that event, the governor (of RBI) has only two options: to transfer the money or to resign. In my view whichever action is taken by the governor, it irretrievably damages the credibility and reputation of RBI. It will mean the capture of RBI by the government,” he said.

He further claimed that in the scheduled RBI board meeting on November 19 the government will try push through its demand as it has packed the board with its “hand-picked” nominees.

“The day of reckoning is November 19 when the RBI board is scheduled to meet. The government has packed the RBI Board with its hand-picked nominees and is making every effort to ram through its proposal at the board meeting,” he said.

The senior Congress leader argued that apart from the prospect of a fiscal deficit crisis the BJP government is desperate to push through its demand at the board meeting as the GST collections have fallen short of estimates, and the government wants money to “step up the expenditure” in an election year.

He targeted Prime Minister Narendra Modi, saying that none of the three declared objectives of demonetisation have materialized and added that the exercise failed to put an end to black money and fake currency.

“Demonetisation did not render any single currency notes worthless and the government did not reap a bonanza of Rs 3 lakh to Rs 4 lakh crore. All the demonetised notes, actually 99.30%, were returned to the RBI... It was the most ingeniously-designed official money laundering scheme,” Chidambaram said.

Regarding the impact of demonetisation on economy, he said that it pushed millions of people into debt, brought down the GDP growth by 1.5%, a huge loss of jobs and forced thousands of MSMEs to shut down.

“Over a 100 people including those from West Bengal died while standing in queues,” he said.

Referring to the success of the JDS-Congress alliance in the recently concluded Lok Sabha bypolls in Karnataka, Chidambaram said that state wise alliance between the Congress and other Opposition parties was the best way to defeat BJP.

" There was an opportunity in Karnataka and the people vote decisively... State wise alliance (between Congress and Opposition parties) will benefit the Congress. The best way to defeat the BJP is to form state-wise alliances," he said.