In an embarrassing volte-face, the Reserve Bank of India on Wednesday revoked a circular issued earlier in the week, which said scrapped-notes deposit above R5,000 in banks could only be made once per account till the December 30 deadline and subject to being “questioned” by the bank staff on the delay. Widespread criticism of the decision as a breach of trust by the government, which had assured the public of free deposits in these notes until the deadline, and doubts about its legality — experts have said the RBI lacks the powers to impose such anticipatory conditions on a citizen unless it has intelligence to presume a financial wrong may have been committed by him — led to the revocation.
“On a review… we advise that the provisions of the (Monday) circular (in) sub para (i) and (ii) will not apply to fully KYC compliant accounts,” the RBI said.
Practically, this removes the restriction on deposits in old R500 and R1,000 notes in most bank accounts, barring the financial inclusion-driven ones including a section of the 26 crore Jan Dhan accounts.
The earlier circular had said tenders of the scrapped notes above R5,000 limit, or many tenders cumulatively exceeding the limit, will be received for credit only once till December 30 this year, and only after questioning the 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”.
Meanwhile, the RBI said banks have issued currency worth over R5.92 lakh crore to the public since the demonetisation of old high-value notes last month. It also said that it has issued 2.2 billion (220 crore) pieces of notes of new R500 and R2,000 during the period — November 10 to December 19.
The currency infused into the system, however, is much less than what has been deposited in the form of defunct notes. The old R500 and R1,000 notes returned to RBI and currency chests amounted to R12.44 lakh crore as on December 10 (the attorney-general last week said in the Supreme Court the amount the value of the returned notes exceeded R13 lakh crore and unconfirmed reports put the figure to be above R14 lakh crore by now). When the note recall decision was announced, such notes worth R15.5 lakh crore were in circulation.