With just 11 days to go for Prime Minister Narendra Modi’s 50-day deadline for depositing the demonetised notes, the Government and the Reserve Bank of India (RBI) on Monday added yet another rider that deposits of more than Rs 5,000 in old Rs 500 and Rs 1,000 notes can be made in a bank account only once from now till December 30 that too after explaining why it had not been done so far.
The RBI said the amount will be credited into the depositor’s account only after the customer gives a satisfactory explanation to two officials of the bank.
After surprised cancellation of legal tender of Rs 500 and Rs 1,000 notes on November 8, the Government had allowed all of the cash holdings with any person to be deposited in bank accounts till December 30. There was no limit on the quantity or value of the junked notes that could be deposited.
However, the confusion arose after the Government on December 17 had issued a gazette notification putting restrictions on deposits henceforth. “The deposits of old notes of Rs 500 and Rs 1,000 denominations have been reviewed by the Government from time to time. Already more than five weeks have elapsed since the time of the announcement of the cancellation of the legal tender character of these notes. It is expected that, by now, most of the people would have deposited such old notes in their possession,” said an official statement.
“The banks have been advised to conduct due diligence regarding the reasons for not depositing these notes earlier,” said the statement, adding that amounts of Rs 5,000 or less may continue to be deposited with banks in the customer’s account, as at present.
“However, cumulative deposits exceeding Rs 5,000 between December 19 and December 30, 2016 will be as per the procedures advised by the RBI in respect of deposits exceeding Rs 5,000,” it added.
Meanwhile, Finance Minister Arun Jaitley on Monday night said no questions will be asked if any amount (up to Rs 5,000) of junked currency is deposited in one go but repeated deposits may raise queries.
Explaining the rationale behind the move, Jaitley said all exemptions to certain sectors and utilities, which had been allowed to accept the banned currency post demonetisation, ended last week and all those in possession of the old notes are supposed to deposit them with banks.
“Anyone who has old currency notes is not allowed to trade in them. He can only go and deposit them with banks,” he said.
With a view to curtailing queues at banks, holders are encouraged to deposit the entire holding in one go, rather than going repeatedly.
“If they go and deposit with bank any amount of currency no questions are going to be asked to them and therefore the Rs 5,000 limit does not apply to them if they go and deposit it once. But if they are going to go everyday and deposit some currency, same person, that gives rise to suspicion that where is he acquiring this currency from. In that event a person may have something to worry about.
Therefore everyone is advised whatever old currency you have please go and deposit it now,” said Jaitley.
The RBI too came out with stipulating deposit norms, saying that restrictive conditions will also apply on the cumulative deposit of such notes in a single account when it exceeds Rs 5,000. However, the defunct currency up to any amount can be deposited under the new black money amnesty scheme or Pradhan Mantri Garib Kalyan Yojana, 2016 (PMGKY).
The RBI further said certain restrictions have been placed on deposits of specified bank notes of Rs 500 and Rs 1,000 denominations, but there is no limit for payment of tax using such notes under the taxation and investment regime for the PMGKY, 2016.
Under the PMGKY scheme, black money holders can deposit unaccounted cash in account which will be subject to 50 per cent tax and 4-year interest free lock-in for the remaining 25 per cent of the amount.
“The credit in such cases shall be afforded only after questioning tenderer, on record, in the presence of at least two officials of the bank, as to why this could not be deposited earlier and receiving a satisfactory explanation,” the central bank said.
Explaining the move, RBI also added that it should be kept on record to facilitate an audit trail at a later stage. An appropriate flag also should be raised in core banking solution or CBS to that effect so that no more tenders are allowed. However, old notes up to Rs 5,000 received across the counter will allowed to be credited to bank accounts in the normal course until December 30, 2016.
Following the demonetisation of Rs 500 or 1,000 notes on November 8, the Government had allowed people to use such notes for certain public utility bill payment as well as for payment to the Government hospitals and asked them to deposit the amount in bank accounts. The central bank said that now-defunct notes in excess of Rs 5,000 shall be credited to only KY-compliant accounts and if the accounts are not KYC-compliant, credits may be restricted up to Rs 50,000 subject to the conditions governing the conduct of such accounts.
“The equivalent value of specified bank notes tendered may be credited to an account maintained by the tenderer at any bank in accordance with standard banking procedure and on production of valid proof of identity,” the RBI said.
“The equivalent value of specified bank notes tendered may be credited to a third party account, provided specific authorisation therefore accorded by the third party is presented to the bank, following standard banking procedure and on production of valid proof of identity of the person actually tendering,” it added.
Meanwhile, in a notification, the Finance Ministry also said that there should not be any limit on the quantity or value of the specified bank notes that are tendered for payment and deposit made under the taxation and investment regime for the PMGKY, 2016.
“The deposit of such notes collected between November 10 and November 14, by the District Co-operative Central Bank shall be subject to RBI instructions.”
Also such notes deposited by individual customers or by the Primary Agricultural Credit Societies complete audit check of the veracity of the Know Your Customer or KYC documents of the said individual or the members of the said Primary Agricultural Credit Societies shall be conducted by the National Bank for Agriculture and Rural Development (NABARD).
“The linked currency chest to District Co-operative Central Banks shall give the exchange value for verified specified bank notes only and subject to usual checks relating to identification of fake Indian currency notes,” the notification said.
The Government said that a separate notification has been issued allowing District Cooperative Central Banks (DCCBs) to deposit the old notes they collected between November 10 and 14. “NABARD, which supervises the DCCBs, will conduct complete audit check of the Know Your Customer (KYC) documents of the individual customers who have deposited these notes or of the members of the Primary Agricultural Credit Society (PACS) who have deposited these notes,” the statement added.