He was RBI governor when the order was issued to get back Rs 500 notes that were printed before 2005, but at the time, Raghuram Rajan had said that the move was done purely to replace notes with fewer security features with notes that ones that had enough of that.
He had also said he didn't intend to ban any kind of currency note. A Quint report claims that even in the last days of his tenure as RBI governor he wasn't in favour of any such move.
In a speech in 2014, when asked about the possibility of banning currency notes, Rajan had explained why he was opposed to the process:
"I am not quite sure if what you meant is demonetise the old notes and introduce new notes instead. In the past demonetisation has been thought off as a way of getting black money out of circulation. Because people then have to come and say "how do I have this ten crores in cash sitting in my safe" and they have to explain where they got the money from. It is often cited as a solution. Unfortunately, my sense is the clever find ways around it," he said in an interaction session at the Lalit K Doshi Memorial lecture.
He explained how people could go around it.
"They find ways to divide up their hoard into many smaller pieces. You do find that people who haven't thought of a way to convert black to white, throw it into the Hundi in some temples. I think there are ways around demonetization. It is not that easy to flush out the black money."
"Of course, a fair amount may be in the form of gold, therefore even harder to catch. I would focus more on the incentives to generate and retain black money. A lot of the incentives are on taxes," he said.
And he actually had a solution.
"My sense is the current tax rate in this country is for the most part reasonable. We have a reasonable tax regime, for example, the maximum tax rate on high-incomes is 33%, in the US it is already 39% plus State taxes, etc., it takes it to near 50. We are actually lower than many industrial countries."
"Given that, there is no reason why everybody who should pay taxes is not paying taxes. I would focus more on tracking data and better tax administration to get at where money is not being declared. I think it is very hard in this modern economy to hide your money that easily," Rajan said.
Here's the full text of his reply
Rajan wasn't the only one to have been opposed to a ban currency notes. A fair number of economists have also criticised the move and the tight deadline.
So will PM Modi's move yield the desired results? Only time will tell.