Last Updated : Dec 19, 2016 07:08 PM IST | Source: CNBC-TV18

Deposits above Rs 5K can be made only once per a/c till Dec 30

Tenders of old banknotes in excess of Rs 5000 into a bank account will be received for credit only once during the remaining period till December 30, 2016.

Tenders of old banknotes in excess of Rs 5000 into a bank account will be received for credit only once during the remaining period till December 30, 2016.

The latest circular from the RBI further adds that such money will be credited into the bank account only after the tenderer has been questioned by two banking officials. The depositor will be asked to explain as to why this money wasn't deposited earlier and only after receiving a satisfactory explanation will such money be accepted.

"The explanation should be kept on record to facilitate an audit trail at a later stage. An appropriate flag also should be raised in CBS to that effect so that no more tenders are allowed," said the RBI note. 

According to the RBI circular, tenders of old notes up to Rs 5000 in value received across the counter will allowed to be credited to bank accounts in the normal course until December 30, 2016.

Even when tenders smaller than Rs 5000 are made in an account and such tenders taken together on cumulative basis exceed Rs 5000 they may be subject to the procedure to be followed in case of tenders above Rs 5000, with no more tenders being allowed thereafter until December 30, 2016.

These  restrictions shall not apply to tenders of old notes for the purpose of deposits under the Taxation and Investment Regime for the Pradhan Mantri Garib Kalyan Yojana, 2016.

Speaking to CNBC-TV18 Ashvin Parekh of Ashvin Parekh Advisory Services said that Rs 5000 looks to be a smalle amount. "If a lot of cash has come back, then there is no need for control."

Rajnish Kumar, MD, SBI said that it is a precautionary measure taken by the Reserve Bank of India. The process becomes more tedious but the number of deposit transactions has come down significantly, he said.

Below is the verbatim transcript of Ashvin Parekh, HP Ranina and Rajnish Kumar's interview to Latha Venkatesh and Reema Tendulkar on CNBC-TV18.

Reema: How are you reading the latest development from the RBI that if you have to deposit cash of more than Rs 5,000 in the old denomination notes, you can do it once. If you do it the second time and then you would be questioned by two banking officials.

Parekh: I must say that this is one more measure towards a deduction of anybody who is now holding black money or anybody who wanted to work with the banking system in putting large deposits. But one thing is becoming very certain that all the rules of the game, if they are announced a little earlier, in the sense right in the very beginning if we are told that after a certain date, we are going to bring it down to a certain point, then at least some genuine people who had kept cash with them, in the hope that if there were long queues and I could go to the banking system because I am very comfortable, I have been paying tax, I have been regularly depositing my money and using banking system, then in that case, I could go to the banking system when the queues are reduced, when it is convenient for me to go to the bank.

Now for those people, this is certainly going to be a measure. The only change of course is that the questions will be asked at the banking system. Rs 5,000 in that context looks a little smaller amount I would say. To that extent, more controls are being imposed by the RBI. Looks like, as Latha said, looks like on the negative side that -- there is already a recognition that a lot of cash has already come back from what was there in the circulation, then maybe there is a need now to control the inflow. It could be that. But the rules of the game if they are changed more often, then it does cause a certain amount of inconvenience at the working level.

Latha: Can it be considered too draconian? For instance, I remember I went and deposited my mother’s money and she had about Rs 20,000. Now, I do not know whether they would require my mother herself to come. It does not say so. We had only taken her Aadhar Card and gone and they had allowed. I guess that would be allowed. But, I do not know if it will mean any more trouble. It does not seem to indicate that. But, this could mean inconvenience even to legitimate citizens you think?

Parekh: Absolutely. That is what I thought, because initially we all saw the reaction, we saw that we have to go up and queue up in the bank branches to deposit our money or go to the ATM to exchange them to a certain denomination. Now, we thought that for example, people like us, in urban areas who use digital banking a lot, who do not use notes at all, we said we can take a while. We can really let the queues come down, we can go to the banking system and then deposit the amount. So, the measures are good, but I thought Rs 5,000 as an amount is too small. How many questions? How many people will you questions and how many questions will you go on and placing on record, something that we have to also examine.

Latha: Would you say this is a positive turn of events, at least it will ensure that bankers don’t collude? If you don’t know the measure announced by the Reserve Bank of India (RBI), the RBI's measure is that hereafter when you tender in your old notes, if the amount is over Rs 5,000, two bank officials will question you and take down the reasons why you have not deposited the money so far and they will take the money only if they receive a satisfactory explanation. The explanation will be kept on record to facilitate an audit trail at a later stage. An appropriate flag also should be raised in CBS to that effect so that no more tenders are allowed. What are your comments?

Ranina: This has been done to make sure that those who are having black money, unaccounted money are now not going to again excuse the system as they did in the past because what is being done is that they are spreading out their money among hundreds of poor people and asking them to deposit the money in their bank accounts and thereafter they will do whatever is necessary to get the money back.

So, this is meant for these people and the government feels that as it is those who are genuinely holding the notes would have deposited the money. They had more than four-five weeks to do that. Now, is the last minute rush because now only 10 days are left till December 30 and therefore this type of measure is brought in to make sure -- so if a person genuinely has money of his own, he has nothing to worry about. He can give whatever explanation he wants and he can face the consequences especially if he is within the Rs 2.5 lakh exemption limit.

Latha: Your thoughts will this at least stop this collusion of bankers with those who are trying to palm off their money through other means?

Kumar: First of all, I have serious objections to your word of collusion that is one, but it is a measure that since November 10th and up till now most of the people would have deposited the specified banknotes (SBN) and there were certain exemptions to certain people up to December 15th. So, normal expectations would be that the people who were allowed to accept Rs 1,000 and Rs 500 notes up to December 15th so that credit may flow in to the account. However, it is about a certain change in the process where the person has to explain why they could not deposit it satisfactorily earlier.

Latha: What has been the collection in SBI so far of old notes?

Kumar: Old notes, about in the range of Rs 2,90,000 crore.

Latha: Around Rs 3 lakh crore. That includes the exchanged ones as well?

Kumar: Everything. All inclusive.

Latha: Would you have any idea? SBI is one fourth of the banking system, so should we assume that for the overall banking system we can easily multiply by four?

Kumar: In these things, it is dangerous to make assumptions, but RBI released certain figures and I read somewhere in the newspaper they were asked to do a recheck also. But the currency chest positions are reported daily to RBI by all the currency chests. So, I have 1,893 of them. Overall there are about 4,000 currency chests. So, currency chest positions would reflect the correct position.

Latha: Now will this ensure that since it is going to be tedious task for those who want to launder money to break their units up into several thousand crore units of Rs 4,999, they will at least go in and do the square thing, deposit in the amnesty scheme, a better chance of success for the amnesty scheme?

Ranina: Amnesty scheme in any case is independent scheme. It will physically apply to all those who have already deposited large chunks of money.

First Published on Dec 19, 2016 01:01 pm
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