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200% penalty on deposits of Rs 10 lakh, if undeclared

NEW DELHI: The government and RBI on Monday unveiled fresh restrictions on deposit of old 500 and 1,000 rupee notes, saying anyone depositing above Rs 5,000 will be questioned “on record, in the presence of at least two officials of the bank, as to why this could not be deposited earlier” and only after a “satisfactory explanation” will the money be deposited. This flies in the face of the government repeatedly urging the public that since the deadline for making deposits of old notes was December 30 , they had ample time and should not rush to bank branches and add to queues.The new notification also says that deposits exceeding Rs 5,000 in old 500 and 1,000 notes will have to be made in one go during the remaining period till December 30. If smaller deposits add up to more than Rs 5,000, the procedure of bank officials seeking explanations may still be followed.“The explanation should be kept on record to facilitate an audit trail at a later stage. An appropriate flag also should be raised in CBS (core banking solution) to that effect so that no more tenders are allowed,” the RBI said.“The banks have been advised to conduct due diligence regarding the reasons for not depositing these notes earlier,” said a finance ministry statement.The central bank said deposits above Rs 5,000 will be credited to only know your customer ( KYC ) compliant accounts and if the accounts are not KYC-compliant, credits may be restricted up to Rs 50,000 subject to rules covering such accounts.The above restrictions will not apply to those depositing old notes under the taxation and investment regime for the Pradhan Mantri Garib Kalyan Yojana , the RBI said.The finance ministry said the decision has been taken to reduce queues in banks and after an assessment that by now, most of people would have deposited old notes in their possession. The government announced its stunning decision to scrap 500 and 1,000 rupee notes on November 8 giving people time until December 30 to exchange and deposit the scrapped currencies.Government officials defended the latest measure, saying these were aimed at preventing those who might still try and use the deposit window using cash mules to convert their black money into white. “This is not aimed at targeting honest taxpayers,” the officials said. “Their money is safe.”The RBI has also clarified that banks must accept even pre-2005 notes which had been withdrawn from circulation since January 2014. Earlier these notes were allowed to be exchanged at only RBI offices. Although the notes were withdrawn from circulation, they continued to be legal tender. The RBI has clarified that while exchange will take place only at RBI branches, banks can still accept them for crediting to customer accounts.The finance ministry said that a notification would be issued allowing district cooperative central banks (DCCBs) to deposit the old Rs 500 and Rs 1000 notes that had been collected by them between November 10 and November 14, 2016.NABARD, which supervises the DCCBs, will audit the KYC documents of the individual customers who have deposited these notes or of the members of the Primary Agricultural Credit Society (PACS) who have deposited these currencies. The details will be notified by RBI, the ministry said.The government and RBI have constantly shifted the goalposts in the demonetisation drive, chopping and changing rules at a confusing pace.But this latest notification hits a new high in whimsicality. The government had clearly announced that old notes could be deposited with banks till Dec 30. The finance minister had appealed to people not to rush to banks in the early days and add to the queues. And yet, we now have the government and RBI saying anybody depositing over Rs 5,000 in old notes will be questioned by bank officials and must give a “satisfactory explanation“ for why they haven't done so earlier.As it is, honest, hard-working citizens who pay their taxes are being denied access to their own money ­ forget the weekly limits, six weeks after they were told things would be okay in two-three weeks, they are returning from ATMs and bank branches empty-handed after standing in line for hours. What's more, public utilities have stopped accepting the old notes. Now, to add insult to injury, they are being told that for as little as Rs 5,000, they will be treated as suspects merely because they decided to wait till the crowds at banks thinned ­ as advised by senior ministers and government officials themselves. This is just not acceptable.Let's say you're asked by bank officials why you waited till now to deposit your money, and you tell them it's because the rules very clearly allowed you to ­ and they say, that's not a satisfactory response.What then? This is plain harassment.