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

The government has given a last chance to district cooperative banks, commercial banks and post offices to deposit the banned Rs500 and Rs 1,000 notes with the Reserve Bank by July 20, provided they were collected within the specified time period.

After the November 8 shock demonetisation announcement, the government had allowed commercial banks and post offices to accept the junked currency from the public till December 30. District central cooperative banks were allowed to accept them only till November 14. 

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 December 30, 2016. The same window would also be available to cooperative banks if they had collected the banned notes by November 14.

The earlier window was open till December 31, a day after the 50-day period of demonetisation of high value currency. According to a government official, the notification for the fresh window comes as per the commitment given to the Supreme Court.

Last December, government had made a commitment to the apex court that it will soon issue a notification allowing the district cooperative banks to deposit the demonetised notes with the RBI. Attorney General Mukul Rohatgi had told a bench headed by the then Chief Justice T. S. Thakur that the district credit cooperative banks in Maharashtra alone have received Rs 5,000 crore in old notes of Rs 500 and Rs 1,000 denomination in just four days, from November 10-14, when they were allowed to accept them. He had also said that a total of Rs 8,000 crore had been received by the banks all over the country.

The November 10-14 window was ambiguous for co-operative banks, post which these banks had challenged government's notification in the Court. The formal notification for cooperative banks to exchange old currency had come from the finance ministry only on November 14, the last date for them to accept the junked notes.

Today's notification said that banks and post offices will have to give reasons for not depositing the withdrawn notes with the specified time period "subject to the satisfaction of the RBI". Money worth crores is also pending with post offices and various banks branches located in remote areas, the official said.

Banks, post offices had requested the Finance Ministry to allow a window to exhaust the money received during the demonetisation window which they could not deposit with RBI in the stipulated time. After demonetisation, the government gave holders of the junked currency a 50-day window to deposit it in their bank or post office accounts by December 30.

But cooperative banks were on November 14 barred from accepting the junked notes as deposits or exchange them with new currency. This left cooperative banks with crores of invalid currency notes. According to a recent report, district central cooperative banks in Maharashtra alone are stuck with Rs 2,770 crore worth old notes they collected during the early days of demonetisation but were unable to deposit them with RBI.

This had led to stalling of a Maharashtra government scheme to hand out Rs10,000 cash to distressed farmers. Several leaders including NCP supremo Sharad Pawar and those from Shiv Sena had represented to the government for allowing cooperative banks to exchange old notes. The relief has finally come. In the notification, the ministry said that "specified bank notes may be deposited by such Bank, Post Office or District Central Cooperative Bank, as the case may be, in any office of the Reserve Bank, within a period of 30 days from the commencement of these rules, and get the exchange value thereof by credit" to their account. While the grace period for resident Indians to deposit the invalidated currency notes expired on 31 March, the non- resident Indians have time till June 30 to deposit such currencies. RBI will accept deposits collected by any bank or post office by December 30, 2016 or by any District Central Cooperative Bank from November 10-14, 2016 should be deposited within 30 days, the notification said. They should also cite valid reasons for non-deposit of the specified bank notes within the period, it added.

Old Rs 500 and Rs 1,000 notes were junked from November 8, 2016 to eliminate black money and curb infusion and circulation of fake Indian currency notes (FICNs). India is the second-largest producer and consumer of currency notes. The circulation of banknotes has increased to 90.27 billion pieces from 64.58 billion over the last five years.

As on November 8, 2016, the total amount of currency in circulation was Rs 17.7 lakh crore, which included specified bank notes (SBNs) of Rs 500 and Rs 1,000. As per the last official count released by RBI on December 13, banks had garnered Rs 12.44 lakh crore in banned notes till December 10.