Govt may bring in ordinance to legalise note ban

The Union Cabinet on Wednesday may issue an ordinance to legalise the government’s November 8 notification banning Rs 500 and Rs 1,000 currency notes.

“The Union Cabinet on Wednesday is likely to consider such an Ordinance as it has to be issued before December 30,” sources said.

After December 30, banks will not accept the banned Rs 500 and Rs 1,000 notes. These notes will only have to be deposited with the RBI.

In the previous two instances, when high denomination notes were banned in 1946 and 1978, the government had passed ordinances to give legality to the executive order. However, this time, the government issued a notification invoking the provisions of the RBI Act of 1934, which empowers the government to scrap bank notes of any denomination.

Experts said the RBI Act would need to be amended to incorporate these changes. That is the reason why an ordinance is being contemplated.

Sources said the ordinance would give a legal backing to the demonetisation move.
Quoting reports, PTI said that there could be a cap on the number of notes an individual could hold after December 30, but there was no confirmation. Violation of the rule could draw a fine of a minimum of Rs 50,000 or 5 times the amount in question – whichever is higher.
Holders of such currency have an option to deposit them in the RBI by March 31, but even that period may be curtailed, they said.

Out of the Rs 15.44 lakh crore worth of Rs 500 and Rs 1,000 notes in circulation on November 8, close to Rs 13 lakh crore have been deposited in accounts or exchanged for valid currency.