Skip to main content

Govt may Take Ordinance Route to Cancel Unreturned Currency

Once notes are cancelled, Reserve Bank can pay the amount to the government as dividend

The government may issue an ordinance to provide clear legal support for extinguishing the demonetised Rs 1,000 and Rs 500 notes that are not returned by December 30. The government wants to amend the Reserve Bank of India Act to this effect and ordinance route may be opted for as Parliament would not be in session immediately after the last day of surrender.The ongoing winter session of Parliament -disrupted by protests as it has been -ends December 16 and the budget session will start only late January .
An ordinance will pave the way for cancelling the said currency once the amount of money returned becomes clear on December 31.“We could look at it (an ordinance),“ said a government official. Only when the unreturned currency is cancelled can it be made available to the government, possibly via a dividend paid by RBI.Once this is done, the government could consider the amount so recovered for its budget that's scheduled to be presented on February 1.
According to initial estimates, a significant chunk of the Rs.15 lakh crore in high-denomination currency was not expected to come back into the system. But that esti mate has been steadily scaled back with some pegging the returned amount at as much as Rs.10 lakh crore. This hasn't been independently verified.
In any case, the unreturned amount is likely to be less than early estimates as the government has allowed a settlement option at 50% tax for unaccounted income. Some estimate that amount of unreturned notes will be  Rs. 3-4 lakh crore.
As of now, notes can only be deposited until December 30 but it's not clear what the deadline for exchange will be at RBI's offices. All notes carry RBI's promise to pay the bearer the amount of the value of the note, which has led to confusion over whether this pledge can be nullified. Finance Minister Arun Jaitley had said last month that some legal measures may be needed.
“So far formally the high-denominational currency has ceased to be a legal tender. Some more legal steps will be required later on if one is to extinguish that,“ he had said. A notification to end the central bank's liability in this regard may not suffice and make it vulnerable to legal challenges.
Former RBI Governor D Subbarao wrote recently that the government may need to amend the law to establish its claim on the money not returned.
The Economic Times New Delhi,07th December 2016

Comments

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm

Credit card spending growth declines on RBI gaze, stress build-up

  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and