Take the case of a rural household woman who has accumulated a saving of Rs 10,000. For convenience’s sake, let us assume that it is the accumulated saving from the family’s farming income. The nearest bank is about 15 km from her place, and she finds it convenient to do without banking and doesn’t have bank account. The government demonetises the currency all of a sudden and mandates that the maximum you are allowed to exchange is Rs 4,000.
Next day, the woman goes to the bank and the bank exchanges Rs 4,000. What about the balance cash with her? The bank will not replace the cash as the exchange has been mandated only once. Nor is she able to open a bank account now with the balance cash as it is not a legal tender anymore. First of all, there is no law which mandates opening and operating a bank account. So, anybody can hold cash legally without any limit (provided it is from income subjected to tax). Second, the Reserve Bank of India (RBI) has promised in writing on the currency note “promise to pay the bearer the sum of so and so rupees”. Isn’t the RBI at fault for giving a false promise? Think over it.
Rajesh Menon Mumbai
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