Nagpur: Following the Supreme Court’s diktat, the Reserve Bank of India may have started accepting the scrapped currency notes of Rs 500 and Rs 1000 from district central cooperatives (DCCBs), the move comes with a rider. A notification issued by RBI on June 29 says that the notes collected by DCCBs only from November 10 to 14, 2016 will be accepted. The balance of specified bank notes (SBNs), held at the close of transaction on November 8, 2016, will not be taken in by RBI, says the notification. SBN is the term used for banned currency.
The move has left many DCCBs in a fix. It means that the balance of SBNs on November 8—the day when note ban was announced—will have to be now treated as dead cash and written off. The written off amount will reduce the banks’ profits proportionately, say sources in the cooperative banks. Nagpur District Central Cooperative Bank (NDCCB), has been left with Rs5 crore according to closing balance on November 8.
The notes otherwise had to accepted by RBI in normal course. The notes, as on balance of November 8, were taken to the currency chest a couple of days later. “Though run by commercial banks, cash at currency chest is technically under RBI. But the notes were turned down at the chests citing a rush due to note-ban. Finally, RBI refused to take the notes altogether,” said a source in NDCCB.
Prime Minister Narendra Modi declared the note-ban decision on the evening of November 8. Going by the notification, RBI will accept the SBNs collected on the subsequent days. However, DCCBs will not be able to remit the cash collected in banned notes on the day when demonetization was announced. This can include the collections of a few days earlier also.
Here is a backgrounder. After demonetization was declared on the evening of November 8, banks reopened only on November 10 after a holiday in between. On November 14, DCCBs were stopped from collecting the banned notes. During the four-day period, DCCBs across the country collected SBNs running into thousands for crores. All banks were supposed to deposit the SBNs with RBI before December 30. The DCCBS were, however, not allowed to do so.
They were left with huge dead cash and unless RBI collected the amount, the banks could not get valid currency against it. Finally, after the matter went to court, RBI issued a notification that even SBNs lying with DCCBs will be taken till July 19. A subsequent notification issued on June 29, however, limits it to the notes collected from Nov 10 to 14 only.
“A number of banks are likely to be left with substantial amount of cash collected on November 8,” said Vinayak Tarale, the expert director in Maharashtra State Cooperative Banks Association.
The association has sought figures from the banks about their ending on November 8. “The DCCBs of Kolhapur and Sangli have balances of Rs25 crore and 15 crore respectively. It is a major amount considering the banks’ size. It will have to be straightaway written off,” he said.
Tarale said the association will be taking up the matter with RBI as well as ministry of finance is also planning legal recourse.