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Mar 11, 2022

5 things you didn’t know about demonetisation and the law

Four years after demonetisation, the Tirupati temple in Andhra Pradesh has ended up with Rs 50 crore demonetised cash. Even after demonetisation, devotees continued to give demonetised notes as cash offerings to the temple. Now, the temple authorities are unable to use the demonetised cash, because demonetised notes are no longer legally acceptable for financial purposes.

Which law is associated with the 2016 demonetisation?

The law governing matters related to the demonetisation of 2016 is the Specified Bank Notes (Cessation of Liabilities) Act, 2017.

What bank notes were affected by demonetisation?

Demonetisation targeted specified bank notes with a value of five hundred rupees, or one thousand rupees, existing on or before 8th November 2016. From this date, these specified bank notes lost their value as legal tender i.e., these notes were no longer recognized by law as an acceptable medium to settle debts or financial obligations.

The significance of demonetisation

The Reserve Bank of India (RBI) is responsible for issuing currency notes. The RBI also has the legal responsibility to repay a person who owns/possesses/holds a currency note, if the person makes a demand. The Act stated that from 31st December 2016, the RBI would no longer be liable to repay holders of specified bank notes (the old notes with a value of ₹ 500 or ₹ 1000). Further, the Act held that these specified bank notes would no longer be guaranteed by the Central government.

The impact of demonetisation

People holding specified bank notes were allowed to deposit these old notes at authorized places till 30th December 2016.

Applicable from the 31st of December 2016, you are not allowed to hold, transfer or receive any specified bank note knowingly or voluntarily. If you violate this, you can be punished with a fine of up to ₹ 10,000, or a fine which is five times the value of the specified bank notes involved in the violation (whichever fine is higher).

However, you are allowed to hold a maximum of 10 old notes; or 25 old notes for the purposes of study or research.

Resolving the problem of the temple

The Tirumala Tirupati Devasthanams (TTD) Chairman, Y.V. Subba Reddy, has requested Finance Minister Nirmala Sitharaman to allow the temple to deposit the old money with the RBI or other commercial banks, in order to monetise that amount. The Chairman said that the temple could not stop devotees from offering old notes as it was linked with their faith and religious sentiments.

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