In a move to curb corruption, black money and fake currency circulation and terrorism funding, PM Narendra Modi declared that currency notes of Rs 1000 and Rs 500 denomination will not be legal tender and would be
void from the midnight of 9th November 2016. Moreover, new notes of Rs. 500 and 2000 will be printed by RBI. The rationale behind this scheme of the BJP Government is that there is circulation of fake currency notes of high denomination such as Rs. 500 and Rs. 1000 in the economy and are mostly used by terrorists for illegal activities and by black money hoarders. As a consequence of withdrawal of these high denomination notes by the Government from the economy, the old high denomination (OHD) notes cannot be used by public to transact for any purpose except at government bus stands for travel by state government or state PSU buses and railway stations (till 72 hours from the date of notification), Public sector Petrol Pumps (till midnight of 11th November), government hospitals and government dispensaries (till 72 hours from the date of notification), co-operative societies (till 72 hours from the date of notification), Government dairies (till 72 hours from the date of notification), airports (till 72 hours from the date of notification) but they have to maintain a register for the same.
OHD notes can be exchanged by people at all Issue Offices of RBI and branches of commercial banks/Regional Rural Banks/Urban Co-Operative Banks/State Co-operative Banks or at any Head Post Office or Sub-Post Office
from 10th November 2016 to 30th December 2016. If within this time period any person is unable to exchange the OHD notes, then an opportunity will be given to him/her to do so at specified offices of the RBI, along with necessary documentation as may be specified by the Reserve Bank of India. For instance, if a person is not there in India during this period, then he/she may authorize in writing enabling another person in India to deposit the notes into the former’s bank account and the authorized person will have to come to the bank branch with the OHD banknotes, the authority letter given by the person and a valid identity proof such as Aadhaar Card, Driving License, Voter ID Card, Pass Port, NREGA Card, PAN Card, Identity Card Issued by Government Department, Public Sector Unit to its Staff.
The limit for exchanging OHD notes in cash is Rs 4000 per person and anything claimed over and above will be receivable by way of credit to bank account. In case the amount to be exchanged exceeds Rs 4000, any branch of a bank, where an account is held by the person concerned, will credit the account of the holder and any branch of any other bank, where an account is not held by such person, can also credit his account on production of valid identity proof and bank account details for electronic fund transfer to his account. But a foreign tourist can purchase foreign exchange equivalent to Rs 5000 using the OHD notes at airport exchange counters within 72 hours after the notification but only if he/she is able to produce a proof of purchasing the OHD notes.
For making payments above Rs. 4000,
- The bank account balance has to be used to pay via cheque or electronic means of transfer such as internet banking, mobile wallets, immediate payment service (IMPS), credit/debit cards etc and in the absence of a bank account, the person concerned has to open a new bank account.
- The cash that can be withdrawn from Banks against withdrawal slip or cheque is subject to ceiling of Rs10, 000/- in a day within an overall limit of Rs.20, 000/- in a week (including withdrawals from ATMs) and this limit is applicable up to 24th November 2016.
- The cash can also be withdrawn from ATMs from 11th November 2016 up to a maximum of Rs.2, 000/- per card per day up to 18th November, 2016. This limit will be raised to Rs.4000/- per day per card from 19th November 2016 onwards.
Although this move will cause short-term inconvenience to public at large, but as a long term benefit, there will be a boost to the banking sector liquidity because there will be bank deposit growth as new bank accounts would be opened by people who did not have any account earlier in order to deposit the OHD notes instead of exchanging them for new notes; real currency circulation would increase in the economy; and with black money brought under legitimate channels, the government’s tax revenue collections would get a boost. As a result, the economy and the banking system would benefit as a large part of the black economy will eventually become a part of the formal economy.
The Indian Lawyer