Relief on old notes may trigger new demands

New Delhi, Jun 22: The government’s surprise announcement late on Monday night to allow district cooperative banks to exchange demonetised currency notes of Rs 500 and Rs 1000 with the RBI may trigger more such demands from those still left with the old bills.

The government had set December 30 as the deadline for exchanging the banned notes, barring some exigencies for which the window was open until March 31 only with the RBI.

However, much after the deadline, the RBI kept getting requests from individuals who failed to exchange the notes. Most of the requests came from students who accidentally found the demonetised notes inside their cupboards or in their books.

“There is a ray of hope that the RBI may open a small window for this category too,” a government official said. But he was not sure of the move, especially after the government issued an ordinance to penalise people holding more than 10 banned notes.

Another official said the government may have allowed the exchange facility to cooperative banks because it would help states to deal with farm loan waiver. Many states have been demanding such a relief as the Centre is not lending financial support.

The Shiv Sena last week vociferously demanded that the RBI exchange old notes close to Rs 2,772 crore for new ones in central cooperative banks, which were worst hit after demonetisation.

As the Centre's announcement coincided with the Sena extending support to BJP's Presidential candidate Ram Nath Kovind, the Opposition Congress asked if Sena’s pressure worked.

Senior Congress leader P Chidambaram said, “Was the midnight gazette notification perfectly timed with garnering support for the Presidential candidate?” Six days after demonetisation on November 14, the RBI had banned cooperative banks from exchanging scrapped Rs 500 and Rs 1000 notes. It had also asked the banks not to accept the junked currency notes as deposits.

Though the RBI did not give any reason for its directive, it is believed that money laundering suspicions forced the bank to do so. States like Kerala, Andhra Pradesh and Maharashtra, where cooperative banks are actively involved with providing credit to farmers, have since been asking the Centre to relax certain norms to help the farm sector.

Kerala Finance Minister Thomas Isaac had even said that cooperative banks in the state have Rs 90,000 crore in deposits and Rs 75,000 crore in credits. The deposit-credit ratio at 80% is much higher than the state's largest nationalised bank, State Bank of Travancore.