From today, Rs. 1,000 notes can only be deposited in accounts.

In further modifications to use and exchange of the demonetised Rs. 500 and Rs. 1,000 notes, the Centre on Thursday extended the exemptions for the use of Rs. 500 notes till December 15. These can still be used to pay fees at government schools and colleges as well as for the purchase of pre-paid mobile top-ups.

The exchange of the high-value notes of Rs. 500 and Rs. 1,000 over the counter at banks and post-offices has, however, been stopped with immediate effect. The Prime Minister, in his demonetisation announcement on November 8, had said the deadline for such exchange was December 30. This effectively means that those holding Rs 1,000 notes can only deposit them into bank accounts from Friday.

Decline in exchange

Regarding the exchange facility for old notes, which was initially allowed up to Rs.4,000 per person, then enhanced to Rs.4,500 before being restricted to Rs.2,000, the Finance Ministry has reasoned that over-the-counter exchange of the old currency notes of Rs. 500 and Rs.1,000 has shown a declining trend.

“It has further been felt that people may be encouraged and facilitated to deposit their old Rs. 500 and Rs. 1,000 notes in their bank accounts,” the Ministry said, adding that this will encourage people who are still unbanked to open new bank accounts.

Incidentally, in his address to the nation on November 8, the Prime Minister had said, “From November 10 till November 24, the limit for such exchange will be 4,000 rupees. From November 25 till December 30, the limit will be increased.”

High-level meeting

The Finance Ministry announced these changes in the demonetisation policy late on Thursday evening, following a high-level meeting chaired by Finance Minister Arun Jaitley, based on representations received from several quarters.

Separately, the Reserve Bank of India (RBI) issued an advisory to banks to ensure adequate cash to meet the likely demand of government officials and pensioners and similarly, provide adequate supply at the military outposts for the cash requirements of armed forces personnel.

“The central government has been reviewing the issues related to the cancellation of legal tender character of old Rs 500 and Rs 1000 notes… and has also been receiving various suggestions in this regard,” the Finance Ministry said while announcing these relaxations after ‘due consideration of all relevant aspects.’

Purchases from consumer co-operative stores with old currency notes have now been limited to Rs 5000 at a time, while foreign citizens can now exchange foreign currency up to Rs 5000 per week. “Necessary entry to this effect will be made in their passports,” the statement said, adding that instructions in this regard will be issued by the RBI.

The RBI has informed banks that they must facilitate the opening of new accounts for unbanked people, and encourage those who approach them for exchanging the old currency notes to deposit them into bank accounts.

‘Consider extension’

Sources said the All India Grameen Bank Workers Organisation and All India Grameen Bank Officers’ Organisation had requested the PM to consider extending the November 24 deadline for old high-value currency notes for the benefit of village dwellers.