Date: 2016-12-19Category: Not ApplicableState: Union GovernmentCountry: India
Withdrawal of Legal Tender Character of existing ₹ 500/- and ₹ 1000/- Bank Notes (Specified Bank Notes) - Deposit of Specified Bank Notes (SBNs) into bank accounts
Executive Summary:
This circular, issued on December 19, 2016, by the Reserve Bank of India (RBI), introduces restrictions on depositing Specified Bank Notes (SBNs) of ₹500 and ₹1000 into bank accounts until December 30, 2016, while encouraging deposits under the Pradhan Mantri Garib Kalyan Yojana, 2016. It outlines specific procedures for handling SBN deposits exceeding ₹5000, deposits up to ₹5000, and requirements for KYC compliance.
Key Points / Main Content:
SBN Deposits Restrictions:
* Deposits of SBNs exceeding ₹5000 are permitted only once per account until December 30, 2016.
* A satisfactory explanation must be obtained from the tenderer, recorded, and flagged in CBS.
* Deposits of SBNs up to ₹5000 are allowed normally until December 30, 2016, but cumulative deposits exceeding ₹5000 may be subject to the same procedure as deposits above ₹5000.
* Full value of SBNs exceeding ₹5000 shall be credited only to KYC compliant accounts. Non-KYC compliant accounts are restricted to ₹50,000.
Exemptions:
* Restrictions do not apply to deposits under the Taxation and Investment Regime for the Pradhan Mantri Garib Kalyan Yojana, 2016.
SBN Deposit Procedures:
* SBNs may be credited to the tenderer's account at any bank with valid proof of identity.
* SBNs may be credited to a third-party account with specific authorization and proof of identity.
Impact Analysis:
Public Sector Banks, Private Sector Banks, Foreign Banks, Regional Rural Banks, Urban Cooperative Banks, State Cooperative Banks:
* Impact: Banks must implement the new restrictions and procedures for SBN deposits, including questioning tenderers, maintaining records, and flagging accounts in CBS.
* Action Required: Update systems and train staff to comply with the new guidelines and ensure proper documentation.
Bank Customers:
* Impact: Customers are restricted in depositing SBNs above ₹5000 and may need to provide explanations for delayed deposits. KYC compliance is crucial for larger deposits.
* Action Required: Comply with deposit restrictions, provide satisfactory explanations if required, and ensure KYC compliance for their accounts.
RBI:
* Impact: Ensure banks follow the guidelines
* Action Required: Monitor and provide support.
Key Entities Referenced
Reserve Bank of India: India's central bank, responsible for monetary policy and regulation of the banking system. (Inferred from RBI)
Specified Bank Notes (SBNs): Refers to the 500 and 1000 Indian Rupee banknotes that were demonetized.
Public Sector Banks: Banks in India with a majority stake held by the government.
Private Sector Banks: Banks in India where the majority of the ownership is held by private individuals or entities.
Foreign Banks: Banks that are headquartered in a foreign country but have branches or operations in India.
Regional Rural Banks: Regional Rural Banks (RRBs) are financial institutions in India that operate at a regional level to provide credit and banking services to rural and semi-urban areas.
Urban Cooperative Banks: Financial institutions in India that are owned and controlled by their members, primarily serving urban areas.
State Cooperative Banks: Cooperative banks operating at the state level in India, providing banking services to cooperative societies and individuals.
Pradhan Mantri Garib Kalyan Yojana, 2016: A scheme launched by the Indian government to allow individuals to declare undisclosed income and assets.
RBI/2016-17/189
DCM (Plg) No. 1859/10.27.00/2016-17 December 19, 2016
The Chairman / Managing Director/ Chief Executive Officer,
Public Sector Banks/ Private Sector Banks / Foreign Banks/ Regional Rural
Banks / Urban Cooperative Banks/ State Cooperative Banks
Dear Sir,
Withdrawal of Legal Tender Character of existing ₹ 500/- and ₹ 1000/- Bank Notes
(Specified Bank Notes) - Deposit of Specified Bank Notes (SBNs) into bank accounts
Please refer to Circular DCM (Plg) No.1226/10.27.00/2016-17 dated November 08, 2016 on
the captioned subject. On a review of the provisions ii, iii and iv at C of Para 3 dealing with
credit of the value of SBNs into bank accounts it has been decided to place certain
restrictions on deposits of SBNs into bank accounts while encouraging the deposits of the
same under the Taxation and Investment Regime for the Pradhan Mantri Garib Kalyan
Yojana, 2016 as indicated below:
i. Tenders of SBNs in excess of ₹ 5000 into a bank account will be received for
credit only once during the remaining period till December 30, 2016. The credit in
such cases shall be afforded only after questioning tenderer, on record, in the
presence of at least two officials of the bank, as to why this could not be deposited
earlier and receiving a satisfactory explanation. 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 to that effect so that no more tenders are allowed.
ii. Tenders of SBNs up to ₹ 5000 in value received across the counter will allowed to
be credited to bank accounts in the normal course until December 30, 2016. Even
when tenders smaller than ₹ 5000 are made in an account and such tenders taken
together on cumulative basis exceed ₹ 5000 they may be subject to the
procedure to be followed in case of tenders above ₹ 5000, with no more tenders
being allowed thereafter until December 30, 2016.
iii. It may also be ensured that full value of tenders of SBNs in excess of ₹ 5000 shall be
credited to only KYC compliant accounts and if the accounts are not KYC compliant
credits may be restricted up to ₹ 50,000 subject to the conditions governing the
conduct of such accounts.2
iv. The above restrictions shall not apply to tenders of SBNs for the purpose of deposits
under the Taxation and Investment Regime for the Pradhan Mantri Garib Kalyan
Yojana, 2016.
v. The equivalent value of specified bank notes tendered may be credited to an account
maintained by the tenderer at any bank in accordance with standard banking
procedure and on production of valid proof of Identity.
vi. The equivalent value of specified bank notes tendered may be credited to a third
party account, provided specific authorisation therefor accorded by the third party is
presented to the bank, following standard banking procedure and on production of
valid proof of identity of the person actually tendering, as indicated in Annex-5 of our
circular cited above.
2. Please acknowledge receipt.
Yours faithfully
(P Vijaya Kumar)
Chief General Manager
Related Links
Dec 16, 2016 Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS), 2016
Dec 16, 2016 Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS), 2016
Dec 16, 2016 Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS), 2016 - Operational
Guidelines
Dec 16, 2016 FAQs on Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS), 2016