BackNote ban updates: RBI says strict action against bank officers flouting rules
Two weeks after the Narendra Modi government banned high-value currency notes, there has been no respite from cash crisis for the public
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New Delhi: Exactly two weeks after Prime Minister Narendra Modi’s decision to purge Rs500, Rs1,000 banknotes to remove black money and fake currency from the economy, the norms guiding the demonetisation policy’s implementation remain volatile. The Modi government and the Reserve Bank of India’s (RBI) attempts are geared towards easing the pain of the common man, while countering the opposition charge of mismanagement.
Meanwhile, the demonetisation has raised the hopes that an interest rate cut is in the offing. The demonetisation issue continues to disrupt the proceedings of the parliament as a united opposition sticks to its stand on Prime Minister Narendra Modi to make a reply followed by a voting on it.
Here are the key developments:
• The RBI has asked banks to take stern action against officials involved in fraudulent practices in exchanging old Rs500 and Rs1,000 currency notes, reports PTI.
• As many as 82,500 ATMs, which account for about 40% of cash vending machines in the country, have been recalibrated to dispense new high security currency notes of Rs500 and Rs2,000. Out of 2.2 lakh ATMs, 82,500 were recalibrated till Monday evening. These ATMs have been reset as per the direction of task force set up by the government to expedite the process, Rituraj Sinha, President Cash Logistics Association of India, told PTI.
• Union finance minister Arun Jaitley: “The government will announce more measures to ease the cash crunch in the rural areas."
• The Delhi high court has fixed 8 December for hearing pleas against demonetisation and discontinuation of Rs2,000 currency note, reports Mint.
• The RBI on Monday imposed stiff conditions for withdrawal of up to Rs2.5 lakh in cash from bank accounts for marriages, saying the money can be withdrawn only from the credit balance as on 8 November, the day demonetisation was announced. Moreover, the cash withdrawn should be used only to make payment to those who do not have bank accounts. The banks will need the names of such recipients while applying for withdrawal of the cash. Any cash withdrawal for wedding purposes will require names of bride and groom and other supporting documents. The amount can be withdrawn only if the date of marriage is on or before 30 December 2016.
• Providing relief to lenders, the Reserve Bank of India (RBI) on Monday gave them an additional 60 days’ time to reclassify a loan in default as bad on their books and start setting aside money to cover it. This is over and above the 90-day period according to existing guidelines. To receive this benefit, the borrower must be someone who has a sanctioned limit of not more than Rs1 crore and the repayment falls due between 1 November and 31 December.
• Expectations of an interest rate cut by the RBI have surged since the government decided to withdraw high-value banknotes in a crackdown on unaccounted wealth. Already banks have slashed deposit rates due to huge inflow of liquidity into the system.
• The government directed banks to waive charges on all manner of electronic payments including money transfers to encourage people to go cashless as queues at branches and cash machines grew shorter in the country’s biggest cities. But the currency shortage that prevails in rural India could get worse unless addressed urgently, bankers said, reports The Economic Times.
While the Opposition parties led by the Congress Party, Trinamool Congress, and the Left Parties have stepped up their attack on the government, reactions against the demonetisation issue are coming from abroad as well:
• CPI(M) is seeking legal opinion on moving a contempt notice against Prime Minister Narendra Modi for announcing policy matters like demonetisation outside Parliament but not coming to the House to explain them. “If the Prime Minister makes a major policy announcement outside Parliament, particularly when it has been summoned by the President, it is incumbent that he comes to both Houses to explain the issue. This has not been done," party general secretary Sitaram Yechury told a press conference in New Delhi.
• Congress vice-president Rahul Gandhi: “He (PM Modi) can speak on TV, he can speak in pop concerts, then why not in Parliament?," while speaking to reporters outside the Parliament House.
• CPI(M)’s Sitaram Yechury: “Today, if Parliament is not functioning, blame is entirely on the PM who is not ready to address the Parliament due to arrogance.When the discussion is on the announcement made by the PM, he must participate in the discussion."
This is a violation of the fundamental right to property: @SitaramYechury on #Demonetisation, reports The Economic Times.
• Opposition parties to hold sit-in outside Parliament tomorrow. Both houses are stalled due to ruckus over the demonetisation issue.
• Former US treasury secretary Lawrence Summers has criticized the Modi government’s decision, saying it is hurting ordinary citizens rather than making a serious attempt at combating corruption.
The unorganized sector is particularly feeling the heat from the shortage of currency notes:
• Hundreds of cash-strapped farmers led by Bharatiya Kisan Union (BKU) protested outside a bank at a village in the district
• The impact of demonetization of Rs500 and Rs1,000 banknotes has been massive on the plantation sector because the growers are bound by law to give wages only in cash.
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