President Approves Specified Bank Notes (Cessation Of Liabilities) Ordinance, 2016 [Read Ordinance]

In a press release by the PIB today, it has been announced that The President of India has approved the promulgation of the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016.

The press release states that this ordinance is a follow-up to the decision taken by the Government of India to demonetize Rs.500 and Rs.1000 in circulation at the time, on November 8 this year.

The main objectives of the Ordinance are -

(i) to provide clarity and finality to the liability of the Reserve Bank of India and the Government of India for the Specific Bank Notes(SBNs);

(ii) to provide an opportunity to those persons who were unable to deposit the SBNs within the time provided; and

(iii) to declare holding, transferring or receiving SBNs as illegal, with provisions for penalty for contravention of any of the provisions of the Ordinance.

The press release also mentions various steps taken by the government in order to “eliminate the menace of unaccounted money” in the economy “including setting up of a Special Investigation Team (SIT), enacting a law regarding undisclosed foreign income and assets; amending the Double Taxation Avoidance Agreements between India and Mauritius and India and Cyprus; reaching an understanding with Switzerland for getting information on Bank accounts held by Indians with HSBC; encouraging the use of non-cash and digital payments; amendments to the Benami Transactions Act; and implementation of the Income Declaration Scheme 2016.”

Exchange or deposit of demonetized currency for those citizens who are not residents would be available till June 30, 2017 in order to “allow them adequate time to plan a visit as per their convenience.” Also, this facility has been granted to all Indian citizens who were outside India from 9^th November, 2016 to 30^th December, 2016 to tender these SBNs at the specified Issue Offices of RBI until 31^st March, 2017.

The press note mentions that the above facility would be subject to the regulations of the notification “Foreign Exchange Management (Export and Import of Currency) Regulations, 2015. As per these Regulations bringing back such currency into the country is restricted to Rs.25,000 per person. Separate FEMA provisions are applicable to persons in Nepal and Bhutan which would continue to apply.”

Also, at the time of return to India the number and denominations of the SBN will need to be declared to the Customs authorities at the airports and other entry points. Necessary form for such declaration will be given out by the Central Board of Excise and Customs(CBEC). The details of the declaration and statements that are required to be submitted along with the SBNs at the time of deposit in RBI Issue Offices will be separately announced by RBI. Any false declaration will invite a fine of Rs. 50,000 or five times the amount of the face value of the SBN tendered, whichever is higher.

After the period of exchange is over, the liabilities of the Reserve Bank and the guarantee of the Central Government towards the Specified Bank Notes will stand extinguished. Further, to prevent any continued parallel transactions with the SBNs by unscrupulous elements, after this period, holding, transferring and receiving SBNs will attract a fine of Rs.10,000 or five times the amount of the face value of the SBN involved in the contravention, whichever is higher.

Read the ordinance here.

This article has been made possible because of financial support from Independent and Public-Spirited Media Foundation.