Modi government makes it illegal to hold old notes post March 31

Modi government makes it illegal to hold old notes post March 31 Two days before the deadline for depositing old 500 and 1,000 rupee notes expires, the Cabinet today approved promulgation of an Ordinance to make possession of a large number of scrapped banknotes a penal offence that will attract monetary fine. The Specified Bank Notes Cessation of Liabilities Ordinance makes holding of old 1,000

and 500 rupee notes after March 31 beyond a threshold amount a criminal offence that will attract a monetary fine of Rs 10,000 or five times the cash held, whichever is higher.

Furnishing wrong information while depositing the old currency between January 1 and March 31 will attract a fine of Rs 5,000 or five times the amount.

Official sources said the Cabinet headed by Prime Minister Narendra Modi approved the Ordinance, but did not say if the penal provisions will apply to holding the junked currency after the 50-day window to deposit them at banks ends on December 30 or after March 31, till which time deposit of old currency notes at specified branches of the Reserve Bank after submitting a declaration form is open.

The Ordinance also provides for amending the Reserve Bank of India (RBI) Act to provide legislative support for extinguishing the demonetised banknotes that are not returned.

While the high-denomination currency ceased to be a legal tender from midnight of November 8, 2016, a mere notification was thought to be not enough to end the central bank's liability and avoiding future litigations.

Currency notes carry RBI's promise to pay the bearer the amount of the value of the note, a pledge that can be nullified only by legislation after giving due opportunity to everyone to return old notes.

Sources said the proposal put to the Cabinet was for a four-year jail term for anyone possessing a number of demonetised currency after March 31, 2017, but it was not immediately clear if it was approved.

The Ordinance will have to sent to the President and after his assent will come into force.

The Ordinance, which will have to be converted into a proper legislation by passing of a law by Parliament within six months, makes possession, transfer or receiving an amount of over Rs 10,000 in the now-demonetised 500 and 1,000-rupee notes a punishable offence.

A maximum of 10 banned notes may be allowed to be held by any person.

Sources said while the deadline for the deposit of old currency in bank or post office accounts expires on Friday, time till March 31 is available for doing so with RBI with stiff conditions by people who were abroad, armed forces personnel posted in remote areas or others who can give valid reasons for not being able to deposit the cancelled notes at banks.

While announcing the demonetisation of the old currency on November 8, the government had allowed holders to either exchange them or deposit in bank and post office accounts. While the facility to exchange the old notes has since been withdrawn, depositors have time till Friday to deposit the holding in their accounts.

Deposit with specified branches of RBI is allowed till March 31, but only for exigencies.

In 1978, a similar Ordinance was issued to end the government's liability after Rs 1,000, Rs 5,000 and Rs 10,000 notes were demonetised by the Morarji Desai-led government.

Sources said the legal amendments are needed every time the government decides to scrap any legal tender to put an end to its promissory note.

Of the Rs 15.4 lakh crore worth of currency that was scrapped, about Rs 14 lakh crore has been deposited in banks or exchanged.