Govt asks banks to deposit junked notes with RBI by July 20

In a second chance post demonetisation, the Finance Ministry has permitted banks and post offices to deposit junked ₹500 and ₹1,000 notes, provided they were collected within the specified time period.

Prime Minister Narendra Modi announced a shock move on November 8 a year ago to drain old Rs 500 and Rs 1,000 rupee notes - worth a combined United States dollars 256 billion (Rs 16,540 billion).

The deposits can be made under Specified Bank Notes (Deposits by Banks, Post Offices and District Central Cooperative Banks) Rules, 2017.

The finance ministry, through a notification on Wednesday, allowed banks and post offices to exchange any old junked notes with RBI in the next one month, provided they were collected by 30 December, 2016.

But cooperative banks were on November 14 barred from accepting the junked notes as deposits or exchange them with new currency.

The reason, the banks say, is that almost six months after demonetisation, they still have crores of cash in old currency, which the Reserve Bank of India (RBI) is refusing to accept.

The earlier window was open till 31 December, a day after the 50-day period of demonetisation of high value currency.

This left cooperative banks with crores of invalid currency notes.

Last week, Maharashtra Minister Dilip Raote had demanded that the government should allow the RBI to accept the Rs 2,271 crore lying with the DCCBs.

However, neither the government nor the RBI has till now announced the amount of demonetised currency that was deposited post demonetisation.

Another official said the government may have allowed the exchange facility to cooperative banks because it would help states to deal with farm loan waiver.

On November 8 a year ago, it had announced an immediate withdrawal of the old series ₹500 and ₹1,000 notes and their replacement with new ₹500 and ₹2,000 notes in order to curb tax evasion and fake currency.

The gazette notification comes on a day when the Shiv Sena announced endorsement of NDA Presidential candidate Ram Nath Kovind, after the party had last week demanded that the over Rs 2,270 crore lying with the DCCBs be accepted by the Reserve Bank of India (RBI).

  • Zachary Reyes