The Narendra Modi government’s demonetisation ordinance, passed by Cabinet on Wednesday, is only a technical requirement to extinguish the RBI’s liability on banned Rs 500, Rs 1,000 currency notes, and will not mean much both for the government and the common man.
Reason: The relevance of the ordinance is almost nil otherwise since 90 percent of the demonetised money has already come back to the system. Hence, it is unlikely that the ordinance will scare the crooks and force them dump their illegal cash in PMGKY or banks. For citizens with legitimate funds, there is little to worry. They still have time till 31 March to deposit their money in RBI counters. Only tax cheats, who are in no position to take their ill-gotten wealth to day light need to fear.
Going by the reports, the ordinance will effectively penalise any one holding demonetised Rs 500 and Rs 1,000 notes after 31 March, when the deadline to deposit these notes at the RBI window ends. According to the ordinance, named the Specified Bank Notes Cessation of Liabilities Ordinance, holding these notes after 31 March deadline would be a criminal offence that can attract a penalty, including a jail term, for possession of the scrapped 500 and 1,000 rupee notes beyond a cut-off date.
The cabinet also approved the decision to extinguish the liability of the government and the central bank on the demonetised high-denomination notes to prevent future litigations.
As mentioned above, this ordinance is only a technicality and wouldn’t serve much purpose for the government since out of the Rs 15.4 lakh crore currency demonetised on 8 November, already Rs 14 lakh crore have already come back, according to reports. For the common man too, there is no reason to worry on depositing his money. That means nearly, all the money government invalidated on 8 November has found their way back to the banking system.
Also, people can deposit whatever money remaining with them in banned currencies in bank branches till 30 December. Even after that, there is a window at designated RBI branches until 31 March. Only those with unaccounted cash with them needs to worry since depositing money at RBI counters will attract tighter scrutiny.
The only purpose of this ordinance is to legally terminate RBI’s liability on the banned currencies to prevent future litigations. Similar ordinance was promulgated in 1978 too to extinguish government's liability after Rs 1,000, Rs 5,000 and Rs 10,000 notes were demonetised by the Janata Party government under Morarji Desai. Unless the liability is legally ended, the RBI cannot refuse someone carrying an old Rs 500, Rs 1000 note and claiming its value in a court of law, since it will continue to remain as a legal tender. This is the reason why the ordinance was necessitated.
For the tax cheats, the final deadline of 31 March is crucial. If they fail to deposit the money either at bank branches or RBI, or deposit in the black money declaration scheme, PMGKY by 31 March, they will have to face prosecution.
But only fools will keep the old currency with them beyond March, when these notes will cease to be legal tender. Smart tax cheats with unaccounted cash would have pushed their money into different bank accounts using benamis since 10 November instead of waiting to walk into RBI counters to face scrutiny and where chances of getting caught are high. The RBI window is originally meant for high value depositors, like institutions, who couldn’t deposit their old notes by 30 December.
The short point here is the demonetisation ordinance means little, beyond technicality, both for common man and the Modi government.