Govt opens new window for banks, post offices to deposit old notes with RBI

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New Delhi: The finance ministry has opened a new one-month window for district cooperative banks, commercial banks and post offices to deposit demonetised Rs500 and Rs1,000 currency notes with the Reserve Bank of India (RBI), provided these notes were collected from customers within the specified time period.

While post offices and commercial banks were allowed to receive the old high-value currency notes till 30 December, district central cooperative banks were allowed to accept these only till 14 November.

In a gazette notification published on Tuesday, the finance ministry said banks and post offices have to give reasons for not depositing the withdrawn notes within the specified time period, “subject to the satisfaction of the RBI”.

The government withdrew the high-value currency notes worth 86% of money in circulation on 8 November with an intention to curb the menace of black money and counterfeit notes. While the grace period for resident Indians to deposit the invalidated currency notes expired on 31 March, the non-resident Indians have time till 30 June to deposit such currencies.

While RBI is yet to release the value of demonetised currency notes collected so far, it is estimated that a substantial part of the invalidated currency has returned to the banking system. The government has insisted that the mere act of depositing money in a bank account doesn’t convert black money into white money.

India’s economy decelerated to 6.1% in the fourth quarter from 7% in the third quarter of 2016-17 largely due to a demonetisation-induced slowdown in construction and financial services sectors. The government has claimed a significant jump in digital transactions and an expanded tax base as a result of demonetisation.