Demonetisation: 90% of banned notes back in system, no big dividend seen

New Delhi: With nearly Rs 14 lakh crore out of the Rs 15.4 lakh crore worth of 500 and 1000 rupee junked already deposited in banks, the expectation that RBI will be able to give a substantial dividend to the government, seems to be a contradictory proposition, a news paper has reported.

As per a report in the Times of India,  the deposit to the tune of lakhs of crore only indicate that “ways were found to deposit unaccounted money”. Meanwhile the government expects to “gain tax revenues from large deposits above the prescribed Rs 2.5 lakh per individual limit.” it added.

TOI further states that the government sees gains from small savings that were “kept in households being deposited in bank accounts that make these funds productive and safe.”

In the latest, The Cabinet has approved promulgation of an ordinance to impose a penalty, including a jail term, for possession of the scrapped 500 and 1,000 rupee notes beyond a cut-off.

The Cabinet headed by Prime Minister Narendra Modi also approved an ordinance to amend the RBI Act to extinguish the liability of the government and the central bank on the demonetised high-denomination notes to prevent future litigations.

Official sources said the ordinance has been cleared, but did not say if the penal provisions would apply for holding the junked currency after the 50-day window to deposit them in banks ends as of December 30 or after March 31, till which time deposit of old currency notes at specified branches of the Reserve Bank after submitting a declaration form is open.

The penalty for holding old currency in excess of 10 notes may include financial fines and a jail term of up to 4 years in certain cases.

While announcing the demonetisation of the old currency on November 8, the government had allowed holders to either exchange them or deposit in bank and post office accounts. While the facility to exchange the old notes has since been withdrawn, depositors have time till Friday to deposit the holding in their accounts.

Meanwhile, as the 50-day deadline for completion of demonetisation process draws near, there is a growing consensus among bankers that the restrictions on withdrawal would have to continue even in the New Year so as to maintain orderly working at the banks

Restrictions on withdrawal of cash from banks and ATMs are likely to continue beyond December 30 as currency printing presses and RBI have not been able to keep pace with the demand of new currency notes

Recently, SBI Chairperson Arundhati Bhattacharya had also indicated that restriction on withdrawals cannot be lifted entirely unless more cash is made available to banks.

With Agency Inputs