Demonetisation: Govt gives a month for cooperative banks, post offices to deposit old notes with RBI
Cooperative banks have also been allowed to exchange old currency notes with the RBI, if they had collected these notes by 14 November, the day RBI barred them from dealing in old notes
The government on Wednesday allowed banks and post offices to exchange old, big bank notes, which are no longer in circulation, with the Reserve Bank of India (RBI) in a month, provided these notes were collected by 30 December 2016, a finance ministry statement said.
Cooperative banks have also been allowed to exchange old currency notes with the RBI, if they had collected these notes by 14 November, the statement said.
Prime Minister Narendra Modi announced a shock move on 8 November last year to ditch Rs 500 and Rs 1,000 notes - worth a combined $256 billion - that he said were fuelling corruption, being forged and even paying for attacks by militants who target India.
Soon after the demonetisation announcement, on 14 November cooperative banks were asked not to accept the old Rs 500 and Rs 1,000 currency notes as deposits or exchange those notes with the new currency notes (read the notification here).
This meant that these lenders could only deal with permissible denominations of Rs 100 and below or take deposits in new currencies that were hardly available in the system.
The move by the central bank had resulted in considerable heartburn in the co-operative banking system and in turn the rural economy, where these lenders have huge presence.
Cooperative banks are particularly important for farmers and lower income groups who want small ticket loans in less time in relation to larger banks.
According to data from Nabard, the country has 32 state cooperative banks, 370 district central cooperative banks as on 31 March 2015. The number of primary agricultural credit societies (PACS), the smaller ones, as on 31 March 2014, stood at 93,042, as per the latest data available.
One of the states which took a major hit due to the curb on cooperative sector is Kerala, where there are over 2,500 cooperative bank branches. The decision pushed the ruling and Opposition fronts led by the Communist Party of India (Marxist) and the Congress, respectively, to the path of agitation.
The Cooperative Bank Employees Federation in Tamil Nadu had alleged that the state's rural economy came to a grinding halt as agricultural cooperative societies, textile and fishermen associations with bank accounts in Central Cooperative Banks had been badly hit after the RBI's circular.
Recently, a report by NDTV said district central cooperative banks in Maharashtra alone are stuck with Rs 2,770 crore worth old notes they collected during the early days of demonetisation, which they have not been able to exchange the notes.
The finance ministry's move on Wednesday will come as a relief to these banks.
'It would be in the form of a digital token that represents legal tender. It would be issued in the same denominations that paper currency and coins are currently issued,' RBI said
However, the RBI Governor Shaktikanta Das said that despite the downward revision in the economic growth projection, India will remain among the fastest-growing major economies in the world
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