Modi government makes it illegal to hold old notes post March 31

The Cabinet on Wednesday approved promulgation of an ordinance to extinguish Reserve Bank of India's liability towards the Rs 500 and Rs 1000 notes that ceased to be a legal tender from November 8.

This ordinance would provide the legislative backing for the demonetisation exercise.

It will make necessary changes to the RBI Act to allow for extinguishing central bank's liability with regard to issued currency that has been cancelled.

All notes carry RBI's promise to pay the bearer the amount of the value of the currency and it requires a legal change to end this liability.

The ordinance also seeks to make possession of more than ten notes of Rs 500 or Rs 1000 a penal offence attracting a monetary fine that could Rs 10,000 or five times the cash held, whichever is higher, a government official said.

The ordinance will have to be sent to the President and after his assent will come into force.

Fresh guidelines would be issued for exchange of notes at RBI counters post December 30. Notes will be allowed to be deposited with select branches of RBI till March 31 in exceptional circumstances.

Source : http://economictimes.indiatimes.com