With 90 per cent of scrapped currency back in the system, it seems bringing an Ordinance to penalise persons with old notes is just a technical formality rather than a measure to provide relief to ordinary citizens.
Two days before the deadline for depositing old 500 and 1,000 rupee notes expires, the Cabinet on Wednesday approved promulgation of an Ordinance to make possession of a large number of scrapped banknotes a penal offence that will attract monetary fine.
The Specified Bank Notes Cessation of Liabilities Ordinance makes holding of old 1,000 and 500 rupee notes after March 31 beyond a threshold amount a criminal offence that will attract a monetary fine of Rs 10,000 or five times the cash held, whichever is higher.
Furnishing wrong information while depositing the old currency between January 1 and March 31 will attract a fine of Rs 5,000 or five times the amount. The Ordinance also provides for amending the Reserve Bank of India (RBI) Act to provide legislative support for extinguishing the demonetised banknotes that are not returned.
While the high-denomination currency ceased to be a legal tender from midnight of November 8, 2016, a mere notification was thought to be not enough to end the central bank’s liability and avoiding future litigations. Currency notes carry RBI’s promise to pay the bearer the amount of the value of the note, a pledge that can be nullified only by legislation after giving a due opportunity to everyone to return old notes.
Sources said the proposal put to the Cabinet was for a four-year jail term for anyone possessing a number of demonetised currency after March 31, 2017, but it was not immediately clear if it was approved. The Ordinance will have to sent to the President and after his assent will come into force.
The Ordinance, which will have to be converted into a proper legislation by passing a law by Parliament within six months, makes possession, transfer or receiving an amount of over Rs 10,000 in the now-demonetised 500 and 1,000-rupee notes a punishable offence.
A maximum of 10 banned notes may be allowed to be held by any person. According to financial experts, the relevance of the ordinance is almost zero as of the Rs 15.4 lakh crore worth of currency that was scrapped, about Rs 14 lakh crore have been deposited in banks or exchanged.
“It is unlikely that the ordinance would scare crooks and force them dump their illegal cash in Pradhan Mantri Garib Kalyan Yojna (PMGKY) or banks. People with legal money need not worry as they still have time till March 31 to deposit their money at RBI counters. It’s the tax evaders, who need to fear,” an expert said.
Notably, in 1978, a similar ordinance was issued to end the government’s liability after Rs 1,000, Rs 5,000 and Rs 10,000 notes were demonetised by the then Janata Party government under Morarji Desai.