Reverse Bank of India -Governance Now

Reverse Bank of India

Flip, flop and then flip: central bank reverses Rs 5,000 order

GN Bureau | December 21, 2016

#Currency ban #RBI #demonetisation #corruption #black money #finance ministry

The Reserve Bank of India on Wednesday withdrew its order of December 19 which had stipulated that the demonetised currency notes could be deposited only once in the quantum of Rs 5,000 or more by December 30.

The fresh circular [https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10790&Mode=0], sent out to all banks, said:

“Please refer to our circular DCM (Plg) No. 1859/10.27.00/2016-17 dated December 19, 2016. On a review of the above, we advise that the provisions of the above circular at sub para (i) and (ii) will not apply to fully KYC compliant accounts.”

The two sub paras referred above, from the previous circular, are:

“Tenders of SBNs in excess of ₹ 5000 into a bank account will be received for credit only once during the remaining period till December 30, 2016. The credit in such cases shall be afforded only after questioning 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. The explanation should be kept on record to facilitate an audit trail at a later stage. An appropriate flag also should be raised in CBS to that effect so that no more tenders are allowed.

“Tenders of SBNs up to ₹ 5000 in value received across the counter will allowed to be credited to bank accounts in the normal course until December 30, 2016. Even when tenders smaller than ₹ 5000 are made in an account and such tenders taken together on cumulative basis exceed ₹ 5000 they may be subject to the procedure to be followed in case of tenders above ₹ 5000, with no more tenders being allowed thereafter until December 30, 2016.”

This would be close to 60th modification in about 45 days, or since the demonetisation was announced on November 8. The daily flip-flops reveal what critics have termed the lack of homework on the part of the RBI and the finance ministry before implementing the most disruptive decision.

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