Union Finance Minister Arun Jaitley on Tuesday defended the government for maintaining secrecy over demonetisation before its announcement, saying transparency in this case would have been the 'greatest instrument of fraud'.

Jaitley, who is on a week-long visit to the United States to attend the annual meetings of the International Monetary Fund and World Bank, said that announcing this major initiative in advance could have resulted in people buying gold, diamond and land and going through various kinds of transactions with the cash they had.

"Transparency is a very nice word. But transparency in this case (of demonetisation) would have been the greatest instrument of fraud," Jaitley told students of the Columbia University in New York.

The finance minister was responding to a question that why Prime Minister Narendra Modi kept the demonetisation plan a closely guarded secret with only a handful of top officials privy to the move.

"Secrecy was the essence of that decision making (process). I think, one of the greatest success of demonetisation was that the prime minister and the team -- obviously the RBI was involved, the finance minister was involved -- kept it a closely guarded secret," he said.

"Otherwise in a process where a decision is taken, alternate currency is printed, thousands of people involved in the printing do not know why they are doing it, the currency is collected, tabulated and sent to the currency chest and one has to be ready with the alternate currency the moment it is demonetised and still we were able to keep it a closely guarded secret," he said.

Emphasising that the implementation of demonetisation was a 'success', Jaitley said, "There were no single public unrest in its immediate aftermath."

"This was the largest ever currency replacement exercise. There was inconvenience. Television reporters went and provoked people outside the banks, but still people said that though they were feeling the pinch of it, it was a good move and they support it," the minister said.

Demonetisation had a lot of popular support, Jaitley said, adding that as a result of its implementation the government has been able to manage a large part of the cash currency.

"Digital transactions have doubled. A large number of people have joined the tax net," he said. On Goods and Services Tax, he said that it has been the 'smoothest possible transfer' from one taxation system to the other.

He said that the GST which has been by and large running smoothly would throw up situations which are not anticipated.

"These are challenges which a new system throws up," he said, noting that after the GST came into force they realised that there was no provisions for exemption, and only for refunds.  -- PTI