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Ever since Prime Minister Narendra Modi on November 8 announced his government’s surprise move to demonetise Rs 500 and Rs 1,000 currency notes, the rules on the use, withdrawal and deposit the scrapped banknotes have undergone various changes and modifications.
Further, the government’s narrative on the purpose behind the sudden and disruptive move has also undergone changes. What started as a move to apparently bring to book the people possessing unaccounted wealth in the country over the next 50 days changed to promoting a digital and cash-less society, among other things.
In the 43 days of the demonetisation move being announced, the government and the Reserve Bank of India (RBI) had together issued over 60 notifications on the issue. (Read more)
The narrative presented by the government began to change and shift towards the third week into the demonetisation drive, with the thrust of Prime Minister Modi’s speeches beginning to shift from fighting black money to promoting digital transactions and a less-cash society. Until then, the stated reasons behind the decision were to tackle black money and curb terror financing and counterfeiting. Further, towards the last week of November, a task force was set up under NITI Aayog Chief Executive Amitabh Kant to suggest various ways of moving towards a digital India.
While several new measures were announced to encourage digital transactions, including those using wallets and feature phones, data released by RBI for the month of November showed that such transactions were minuscule when compared to the size of the economy. For example, for USSD, the new channel for feature phones, the transaction volume in November was just Rs 7,000 and the value was about Rs 73.02 lakh. RBI itself called this negligible. Even the wallets, known as prepaid instruments in the RBI parlance, registered 59 million transactions for a value of about Rs 1,300 crore.
There is a view that even the income disclosure scheme, which became effective on December 17 and would extend till March, was contrary to the purpose of taking tough action against black money hoarders. Another major betrayal seemed to be the exemption apparently given to political parties. Finance Minister Arun Jaitley, however, later said that there had been some confusion and political parties were not going to be exempted.
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Here is a list of how rules and regulations have changed since the announcement of the demonetisation move:
November 8: Prime Minister Narendra Modi announces the surprise decision to withdraw the legal tender status of the existing Rs 500 and Rs 1,000 notes. The demonetisation is to become effective from the same midnight. He says old notes worth Rs 4,000 could be exchanged at banks. For withdrawing cash, the limit at ATMs is Rs 2,000, while a person can withdraw Rs 20,000 from a bank in a week with a daily withdrawal cap of Rs 10,000. Cash in the form of discontinued denominations would still be valid at fuel stations, airports and railways. The old notes could be deposited in banks till December 31.
November 9: In addition to the previously allowed uses of the old notes, the government orders Metro stations, monuments under the the Archaeological Survey of India, toll plazas and medicine shops to accept notes of the discontinued denominations. In the subsequent days, the list of exempted transactions would be expanded and the deadline for the use of old notes for such transactions would also be extended.
November 10: Further allowances are made, with the government allowing the payment of educational fees using old notes. Any charges, taxes or penalties due to the government or the municipal and local bodies and bills for utilities like electricity and water could also be paid in old notes.
November 13: In a marginal relief to people, the currency exchange limit is raised to Rs 4,500 from Rs 4,000. Further, the limit on cash that can be withdrawn from ATMs is raised to Rs 2,500 from Rs 2,000. The weekly limit of Rs 20,000 for withdrawal from bank accounts is increased to Rs 24,000 and the Rs 10,000 daily withdrawal cap is removed. (Read more)
November 14: The government extends the use of old defunct Rs 500 and Rs 1,000 notes for paying household utility bills, fuel, taxes, and fees and purchases from co-operative stores till November 24. Earlier, when the demonetisation drive was announced, the use of old currency notes for the initial list of transactions in the exempted category had been allowed for a period of 72 hours. This had been later extended by another 72 hours, even as the list of exempted transactions had been expanded. (Read more)
November 15: The government orders banks to start using indelible ink for marking customers to stop multiple currency exchanges in a day. The announcement is made by Economic Affairs Secretary Shaktikanta Das, as the government's demonetisation measure is about to enter its second week. Das adds that the reason for long queues outside banks and ATMs, a phenomenon all too familiar across all parts of the country since the demonetisation announcement, is that the same people were lining up again and again, thereby cutting out other people. (Read more)
November 17: It is announced that the limit for over-the-counter exchange of old Rs 500 and Rs 1,000 notes will be reduced to Rs 2,000, from the then limit of Rs 4,500, with effect from November 18. The government also announces that farmers can withdraw up to Rs 25,000 per week against the crop loan sanctioned and credited to their accounts, subject to the limits. This is to also apply to Kisan Credit Cards. These accounts would have to be in the name of the farmers concerned and would have to be KYC-compliant. Further, registered traders with the Agricultural Produce Marketing Committee markets are also permitted to draw Rs 50,000 per week to meet various cash requirements like payment of wages to workers and other sundry expenses. The government also allows its Group C employees, including from PSUs, defence and railways, to get salaries up to Rs 10,000 in cash in advance (this is to be adjusted against their November salary) (Read more). In an important relaxation, the government also announces that households will be allowed to withdraw up to Rs 2.5 lakh for weddings from bank accounts that are KYC-compliant. One member of the family – the father or mother of the bride or groom – is to be allowed to withdraw up to Rs 2.5 lakh for a wedding. (Read more)
November 21: It is announced that farmers will be allowed to buy seeds with the old Rs 500 currency notes from government agencies. (Read more)
November 24: The government announces that over-the-counter exchange of defunct currency notes will no longer be allowed and neither will the use of Rs 1,000 notes, even for transactions under the exempted categories. Instead, payments for transactions under all the exempted categories will now be accepted only through old Rs 500 notes, not the Rs 1,000 notes. The government also extends till December 15 the facility of using old Rs 500 notes in public utilities and includes more services like mobile recharge. Payment of fees up to Rs 2,000 per student is allowed in schools and colleges run by central and states governments, municipalities and local bodies. It is also announced that payment towards pre-paid mobile top-up up to a limit of Rs 500 per recharge is allowed, while any purchase from consumer cooperative stores at a time will be limited to Rs 5,000. Current and arrears dues payments would be limited to only water and electricity, a facility that will continue to be available only for individuals and households. (Read more)
November 25: While the exchange of old bank notes continues to be prohibited at banks, such exchange is allowed at Reserve Bank of India (RBI) counters.
November 28: RBI waives the withdrawal limits on new notes deposited in a person’s account. The regular withdrawal limit, however, remains capped Rs 24,000 per week.
November 30: RBI places a limit of Rs 10,000 on monthly withdrawals from Jan Dhan bank accounts. However, branch managers can allow further withdrawals beyond Rs 10,000 within the then applicable limits after ascertaining the genuineness of such withdrawals and duly documenting them in bank records. (Read more)
December 1: The government announces that the old Rs 500 notes can be used at gas pumps, toll booths on national highways and for buying tickets at airports only till the midnight of December 2, instead of the previous deadline of December 15. (Read more)
December 8: The government announces that the scrapped Rs 500 notes will not be valid for making payments for rail catering services, making train reservations, buying Metro tokens and public sector undertakings’ bus tickets from December 10. Earlier, the government had allowed the use of old Rs 500 notes till December 15 for making payments for rail catering services and booking train, metro and government-run bus tickets. (Read more)
December 15: The government announces that accounts with deposits of more than Rs 2 lakh since demonetisation started and a total balance greater than Rs 5 lakh will not be permitted withdrawals or transfer of funds without quoting of permanent account number (PAN), or after the submission of Form 60 if the person does not possess his or her PAN. (Read more)
The government also asks banks and post offices to report to the I-T department all deposits above Rs 2.50 lakh in savings accounts, and more than Rs 12.50 lakh in current accounts, made during the 50-day window provided to tender the scrapped Rs 500 and Rs 1,000 notes. Banks and post offices now have to file a statement of financial transaction in respect of these transactions on or before January 31, 2017, the notification said. Earlier, they were required to report to the I-T Department only when cash deposits in an account exceeded Rs 10 lakh in one full year. (Read more)
December 19: The government announces that deposits of above Rs 5,000 in banned banknotes will be allowed only once till December 30. In separate notifications, the finance ministry and RBI say over Rs 5,000 worth of scrapped notes could be deposited in bank accounts only once, after the depositor has been questioned in the presence of at least two bank executives on why he or she cannot deposit the amount earlier. The finance ministry’s notification comes on Saturday but is released on Monday. RBI’s statement is also released on Monday. “The explanation should be kept on record to facilitate an audit trail at a later stage. An appropriate flag also should be raised in the core banking solution to that effect so that no more tenders are allowed,” RBI states. It also says these restrictive conditions will apply on cumulative deposit of notes in a single account if it exceeds Rs 5,000. (Read more)
December 21: The RBI withdraws the restriction announced in the previous notification. Deposits above Rs 5,000 in banned banknotes are to be allowed multiple times till December 30. However, the condition that the accounts concerned should be KYC-compliant is retained.
December 28: The Union Cabinet approves the promulgation of an ordinance to make the possession of a large number of scrapped banknotes a penal offence that will attract a monetary fine. The Specified Bank Notes Cessation of Liabilities Ordinance makes holding of old Rs 1,000 and Rs 500 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. The ordinance also allows the deposit of a limited amount of old banknotes with specified branches of the RBI till March 31, but only for exigencies. (Read more)
