Demonetisation tightens: No more exchange of Rs 500 and Rs 1000 notes, Centre announces

Shyam Balasubramanian | TNN | Updated: Nov 24, 2016:NEW DELHI: Tightening its demonetisation policy, the Centre has announced that it would no longer allow over-the-counter exchange of old Rs 500 and Rs 1000 notes from Saturday. Another major aspect of the announcement was that the only way to use the old Rs 1000 notes would be to deposit them in a bank account."It has been observed that over the counter exchange of the old currency notes of Rs 500 and Rs 1000 denomination has shown a declining trend," read a government statement announcing the move.
"It has further been felt that people may be encouraged and facilitated to deposit their old Rs 500 and Rs 1000 notes in their bank accounts. This will encourage people who are still unbanked to open new bank accounts. Consequently, there will be no over the counter exchange of old Rs 500 and Rs 1000 notes after midnight of 24.11.2016," the statement added.
The announcement comes a day after the Reserve Bank of India issued a circular to all banking institutions asking them to take steps to ensure their staff members do not subvert the rules by facilitating exchange of currency notes illegally.
The Centre also announced that some of the exemptions that are in place for the use or exchange of the old currency notes would be extended till December 15. It however tightened the squeeze, saying the exemptions would only accept the use of the old Rs 500 notes. This means Rs 1000 notes will now be accepted only for deposits into bank accounts.
Payment of utility bills and arrears will continue to be accepted, but these payments have now been limited to water and electricity, and that too only for individuals and households.
Foreign citizens will be permitted to exchange foreign currency upto Rs 5000 per week, with entries of these transactions recorded in their passports.
Other exemption categories that will continue for the use of the old Rs 500 notes are the payment of school fees up to Rs 2000 in government-run schools and colleges; mobile phone top-ups up to Rs 500 and purchases from Consumer Cooperative Stores up to Rs 5000 at a time. The old currency notes would also be accepted for payments at toll plazas from December 3 to 15, with the toll suspensions continuing till December 2.
This leaves a decreasing number of avenues for the use of the now-demonetised high-value notes - deposits into bank accounts or payment of dues and arrears to select government departments - and pushing towards the government's idea of a cashless economy. Earlier in the day, Union Finance Minister Arun Jaitley had said there are 80 crore debit cards in the country, of which 40 crore are active.

(i) No over the counter exchange of old Rs 500 and Rs 1000 notes after midnight of 24.11.2016.

(ii) Government had also permitted various exemptions for certain transactions and activities wherein payment could be made through old Rs 500 and Rs 1000 notes.

(a) Payments for the transactions under all the exempted categories will now be accepted only through old Rs 500 notes;

(b)Payment of School fees up to Rs 2000 per student in Central Government, State Government, Municipality and local body schools;

(c) Payment of fees in Central or State Government colleges;

(d)Payments towards pre paid mobile top-up to a limit of Rs 500 per top-up;

(e) Purchase from Consumer Cooperative Stores will be limited to Rs 5000 at a time;

(f)Payment of current and arrears dues to utilities will be limited to only water and electricity. This facility will continue to be available only for individuals and households;

(g) Toll payment at toll plazas can be made through old Rs 500 notes from 3.12.2016 to 15.12.2016.

(h) Foreign citizens will be permitted to exchange foreign currency up to Rs. 5000 per week. Necessary entry to this effect will be made in their passports. (Necessary instructions in this regard will be issued by the RBI.)