India puts fresh curbs on deposits of banned notes

India's central bank on Monday (Dec 19) imposed fresh restrictions on deposits of banned currency notes into bank accounts, days before the Dec 30 deadline to swap old rupee bills for new ones.
India's central bank on Monday (Dec 19) imposed fresh restrictions on deposits of banned currency notes into bank accounts, days before the Dec 30 deadline to swap old rupee bills for new ones. PHOTO: AFP

NEW DELHI (AFP) - India's central bank on Monday (Dec 19) imposed fresh restrictions on deposits of banned currency notes into bank accounts, days before the Dec 30 deadline to swap old rupee bills for new ones.

Prime Minister Narendra Modi unleashed chaos last month with his shock move to withdraw high-denomination 500 (S$10.68) and 1,000 rupee notes from circulation, in an effort to tackle widespread corruption and tax evasion.

The decision triggered a cash crisis, with long queues materialising outside banks across the country as people tried to get rid of their old notes - some 86 per cent of all bills in circulation - ahead of next week's deadline.

On Monday the Reserve Bank of India (RBI) said that people would now only be allowed to make a single deposit amounting to more than 5000 rupees (S$106.77) before the deadline, and would be required to explain why they hadn't deposited the money earlier.

"Tenders of Specified Bank Notes (SBNs) in excess of rupees 5,000 into a bank account will be received for credit only once during the remaining period till December 30," the RBI said.

Opposition parties attacked the move, which comes as many Indians are already facing a shortage of cash with ATMS running dry as thousands throng to them.

"There are elderly, housewives, poor and students who were waiting for the long queues to become smaller," the opposition Congress party spokesman Randeep S. Surjewala told reporters in Delhi. "This new rule shows that Modi government has no direction or clear policy", he added.

Modi has repeatedly defended the scheme, saying it will bring billions in so-called "black", or undeclared, money back into the formal system.

"I said this at the start, and will repeat again today, these difficulties that you have been facing will start easing after December 30," he said on Monday, addressing a political rally in the northern state of Uttar Pradesh.

The premier also hinted at more tax raids, arrests and bank scrutiny in the coming days.

In the past few weeks several people have been arrested in surprise raids, revealing the role of bank officials who have allegedly facilitated the illegal exchange of old currency notes.

"Some people thought that they could get away by simply depositing their unaccounted (black) money in the banks. They underestimated the government. They are trapped and will now be caught using technology," Modi warned.