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Saturday, December 31, 2016

President approves cash ban Ordinance

New Delhi December 30, 2016

Minimum fines of Rs 50,000 fine for false declarations till March 31, 2017; Rs 10,000 for holding scrapped notes after that.

President Pranab Mukherjee on Friday approved the promulgation of an ordinance that will help extinguish the Reserve Bank of India and the government’s liability towards the demonetised Rs 500 and Rs 1,000 notes after March 31, 2017, and provides for a minimum fine of Rs 10,000 or five times the face value of such notes found in possession of anyone after that date.

From December 31 to March 31, 2017, those still in possession of currency notes which havew ceased to be legal tender can exchange them at the specified offices of the central bank. The Reserve Bank of India will separately notify the details of the declaration and statements that need to accompany such deposits, but any false declaration will invite a fine of Rs 50,000 or five times the amount of the face value of the SBN tendered, whichever is higher.

“As was notified on 8th November, 2016 those persons who were unable to exchange or deposit the old (Rs 500 and Rs 1000) currency notes in their bank accounts on or before 30th December, 2016 shall be given an opportunity to do so. Accordingly, this facility has been granted to all Indian citizens who were outside India from November 9, 2016 to December 30, 2016 to tender these notes at the specified Issue Offices of RBI until March 31, 2017,” a finance ministry statement said. However, an official clarified that any Indian citizen resident in the country could deposit the notes at the RBI offices up to March 31.

The main objectives of the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 are to provide clarity and finality to the liability of the Reserve Bank of India and the Government of India for the specified bank notes; provide an opportunity to those persons who were unable to deposit these notes till December 30, and declare holding, transferring or receiving such notes as illegal, the finance ministry said.

A special window has been offered to non-resident Indians to return to the country in order to deposit such notes in their possession till June 30, 2017, but this will be restricted to amounts of Rs 25,000 per person as per the Foreign Exchange Management (Export and Import of Currency) Regulations of 2015.

While this will allow NRIs adequate time to plan a visit as per their convenience, the ordinance specifies that they will need to declare the currency they are bringing back to Customs authorities at the time of their return to India. A form for such declarations will soon be unveiled by the Central Board of Excise and Customs.

“After the period of exchange is over, the liabilities of the Reserve Bank and the guarantee of the Central Government towards the Specified Bank Notes (SBN) will stand extinguished,” the finance ministry said. “Further, to prevent any continued parallel transactions with the SBNs by unscrupulous elements, after this period, holding, transferring and receiving SBNs will attract a fine of Rs 10,000 or five times the amount of the face value of the SBN involved in the contravention, whichever is higher.”

“My understanding of this is that there may be some people who may not deposit the old notes for fear that this would in some sense expose their parallel economy transactions, so they would prefer to dispose it off rather than deposit it,” Rajiv Kumar, Senior Fellow at the Centre for Policy Research told The Hindu.

“For example, a lot of small traders would be hiding their current stock of useless notes to protect their future flow of black money. Either they will destroy the notes or they will deposit it, but this ordinance is to prevent people from holding it,” he added.
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