The Big Story: Sliding doors

A circular from the Reserve Bank of India on Monday (once again) changed the terms of the scheme that had been in place since Prime Minister Narendra Modi announced demonetisation on November 8. Back then, Modi had said that people would be free to deposit all their older Rs 500 and Rs 1,000 notes until December 30, with no limit. The Finance Ministry later added that it would scrutinise deposits of more than Rs 250,000 but anyone putting money below that amount would be free from harassment.

Monday’s circular upended all of that and offered a dramatic drop in the scrutiny threshold, from Rs 250,000 to Rs 5,000. The RBI announced that people could deposit older notes of an amount over Rs 5,000 just once by December 30, and even on that one occasion, they would have to satisfy at least two bank officials with an explanation for why they waited until then to make the deposit.

The circular gave no indication of what a satisfactory explanation might be – would long lines, or the government’s own messaging telling people they have until December 30 do? It was also mum on what would happen if the officials were not satisfied. Concurrently, however, it also encourages people to put their older notes into the new amnesty scheme for undisclosed income, which comes with an automatic 50% charge in taxes and penalties.

This new notification already goes some way to shaking faith in the government and a central bank that has put out new rules on an everyday basis since November 8. Worse, it specifically goes back on promises made by the prime minister and others, that people had until December 30 to make deposits of old notes and that amounts lower than Rs 250,000 would not be scrutinised. To make things worse, the open-ended diktat to bank officials leaves space for much harassment.

Later in the day, however, Finance Minister Arun Jaitley said that one-time deposits of any amount would not attract any questions. Although the RBI circular very clearly contradicts him, Jaitley insisted that only people who repeatedly deposit older notes will be questioned.

As if trust in government and the RBI were not low enough following demonetisation, the varying messages coming from Jaitley and the central bank only add to the confusion. Central banks, and those bits of the government responsible for shepherding the economy, are expected to ensure a stable, predictable environment for honest citizens. This massive move has upended that expectation, and earning that trust back might prove to be a major challenge.

The Big Scroll

To deposit more than Rs 5,000 in old notes, you now have to explain yourself to two bank officials.

The great class divide: Anjali Mody examines why the chattering classes can’t fathom the vast support for demonetisation.

In Andhra Pradesh villages, Mridula Chari reports, demonetisation has deprived the elderly of their pensions.

Read all of Scroll’s demonetisation coverage here.

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Punditry

Building a sustainable less-cash society will require more than the shove of demonetisation, writes Jessica Sedon in Mint. Assessing former Tamil Nadu Chief Minister J Jayalalithaa’s legacy involves looking both at schemes that were inclusive and progressive, as well as ones that represented the worst sort of commodification. The alternative to the longstanding norm of seniority in the Armed Forces cannot be an arbitrary selection by the political leadership, writes Sushant Singh in the Indian Express.

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