Wednesday, 28 December 2016

Indian Government Comes With Ordinance to Curb Old Note Possession

Introduction

The Cabinet in India has brought in an ordinance to impose a penalty for possession of the scrapped notes beyond a cut-off point. The penalty of possessing the demonetized Rs. 500 and Rs. 1000 notes beyond certain numbers may even include a jail term or 5 times the value of the seized notes or both. In this blog, we will look at the salient features of this ordinance for the benefit of readers.

demonetized money

Ordinance to Curb Old Note Hoarding

In a swift move, just before the window period of exchange of old notes with new ones comes to an end, the Bharatiya Janata Party government at the center promulgated an ordinance to curb the possession of old legal tender after March 31, 2017 when the RBI window for exchange of old notes also ends. The Central government will now send the ordinance to the President of India for the final approval.  According to this bill, the possession of more than 10 old notes will become punishable by law. The authorities can levy a fine of Rs. 50,000 or five times the total value of notes in possession, whichever is lesser. However, the official sources could not say whether the penal provisions would apply for holding the junked currency after the 50-day window period to deposit them in the bank ends on December 30 or the final window of note exchange in selected branches of Reserve Bank of India (RBI) comes to an end on March 31, 2017.  The penalty may also include a jail term of up to 4 years in certain cases.

currency hoarding

Ordinance on Limiting Government Liability

The Cabinet headed by Prime Minister Narendra Modi also approved an ordinance to bail the government and the central bank from future litigation. In a thoughtful move, the Finance Ministry, working with Law Ministry, has brought an amendment to the RBI Act to extinguish the liabilities of the government and the central bank on the demonetized high-denomination notes. This move will help the government to stand in good stead when citizens and opposition parties try to corner it through a battery of future litigation in the courts of the country.

government liability

Demonetization Policy

While announcing the demonetization of the old currency on November 8, 2016 the government had allowed holders of the older notes to either exchange or deposit them in bank and post office accounts. The facility to exchange the old notes was withdrawn on December 15, 2016. However, depositors have time till December 30, 2016 to deposit the holding demonetized notes in their accounts. Giving more time, the Central Government has given another window of opportunity to the holders of old currencies to deposit them in selected branches of RBI across the country. This step was taken by the Central Government to stop the menace of black money and fake currency funding the unlawful activities, including the covert war against nation by terrorists from across the border, corruption, illegal currency hording, etc.

demonetization policy

Thuruvananthapuram New Delhi, Delhi, India
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