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Retrospective comfort: demonetisation in 1978 and 2016

Ranjit Cotta Carvalho, the AAP candidate from the Fatorda constituency, is the richest candidate in the fray, with assets worth Rs. 65 crore.   | Photo Credit: V. Sreenivasa Murthy

A rejoinder filed by the Centre engages the Supreme Court in a comparative study between the demonetisation exercise of January 16, 1978 under The High Denomination Bank Notes (Demonetisation) Ordinance, 1978 (1 of 1978) and the recent one of 2016 which was later given statutory recognition under The Specified Bank Notes (Cessation of Liabilities) Act.

The 1978 ordinance was promulgated, providing that all high-denomination banknotes shall, notwithstanding anything contained in Section 26 of the Reserve Bank of India Act, 1934, cease to be legal tender. The ordinance was replaced by The High Denomination Bank Notes (Demonetisation) Act, 1978 on March 30, 1978.

Doing it differently

The Centre reasoned that compared to the 1978 exercise, the 2016 made only “extremely reasonable” demands from the public.

In the 1978 one, people were allowed over-the-counter exchange of their demonetised notes only if they did not have a bank account. But in the 2016 exercise, the public was allowed to do such exchanges up to a limit. This limit was monitored closely and was modified according to the prevailing situation.

 

Compared to the provisions allowed in 1978, in 2016 more types of banking establishments were allowed to exchange demonetised banknotes. In 1978, only the RBI offices and few branches of State Bank of India/designated nationalised banks were allowed. In the present instance, the notes could be exchanged at any issue office of the RBI or any branch of public sector banks, private sector banks, foreign banks, regional rural banks, urban cooperative banks, State cooperative banks and banking companies as defined in the Banking Regulation Act, 1949.

Thus, besides the RBI offices, 1.3 lakh bank branches, 1.5 lakh post office branches, 1 lakh banking correspondents and 2.2 lakh ATMs were involved in retrieving the demonetised currency from the system and dispensing exchange value to the people.

Purchase of essentials

In the previous instance, no transactions with demonetised banknotes were allowed immediately on declaration of demonetisation, whereas this time, to mitigate difficulties faced by people, various essential goods and services were allowed to be available on tendering of the specified banknotes for a limited period. Control rooms were set up both in the Finance Ministry and RBI, which were in operation till December 30, 2016, the last date of stipulated period of deposit.

 

Again, the form of declaration specified in 1978 and needed to be filed by each individual at the time of exchanging the banknotes required a large number of details from the declarant, besides attestation by the bank manager or a magistrate or a police officer. Further, the declaration form had to be submitted in triplicate. No such requirements were part of the recent exercise.

Compared to the 1970s, electronic media and social media played a major part in disseminating information to the masses in the 2016 exercise. Finally, people were given just six days to exchange their demonetised notes in 1978, whereas they had 51 days’ time in 2016.


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Printable version | Jul 26, 2021 10:47:08 AM | https://www.thehindu.com/opinion/op-ed/retrospective-comfort/article19318832.ece

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