Rs 500, Rs 1000 banned: What will banks do to make currency transaction smooth

The Reserve Bank of India has issued directives to all public, private, foreign and cooperative banks to ensure smooth transition of the major currency changes announced by Prime Minister Narendra Modi on Tuesday.

In a surprise to public and financial system alike, PM Modi on Tuesday evening announced a ban on the currency notes of Rs 500 and Rs 1000 denominations to crackdown on the rampant black money practices and fake currency racket. 

In its directive, the monetary authority notified the announcement and informed banks that ‘new series of Bank Notes called Mahatma Gandhi (New) Series having different size and design, highlighting the cultural heritage and scientific achievements of the country, will be issued’.

Through the directive issued as a public notice, the banks have been informed that bank branches will be the primary agencies through which the members of public and other entities will be exchanging the banned currency for valid bank notes or account credit upto and including the December 30, 2016. Therefore, banks have to accord highest priority to this work.

Also read | How to exchange banned Rs 500 and Rs 1000 notes: Frequently Asked Questions

In order to enable the members of public and other entities to exchange their existing ₹ 500/- and ₹ 1000/- notes, the following arrangements have to be made by the banks.

1. Action to be taken on November 09, 2016

i) November 09, 2016 (Wednesday) shall be a non-business working day for all banks. However, branches will function on that day to carry out preparations for implementing the scheme as per this circular.

ii) Rs 500 and Rs 1000 notes stocked in ATMs and other cash cash dispensing/receiving machine, will have to be called back forthwith. 

iv) All ATMs, Cash Deposit Machines, Cash Recyclers and any other machine used for receipt and payment of cash shall be shut on 9th and 10th November, 2016.

v) All ATMs and cash dispensing machines will have to be re-configured to disburse bank notes of ₹ 100/- and ₹ 50/- denominations prior to reactivation of the machines on November 11, 2016; however banks should await separate instructions from Reserve Bank of India on issuing Mahatma Gandhi (New) series Notes through ATMs and cash dispensing machines though they can be issued over the counters from Nov 9, 2016.

vi) Arrangement should be made by the branches to promptly deposit these banned notes with the linked currency chest / RBI and get the amount credited to their account.

vii) Branches should estimate their cash requirement and obtain from the linked / nearby currency chest /RBI Bank Notes of other valid denominations.

viii) Cash Deposits machines / Cash Recyclers should continue to accept banned currency notes upto December 30, 2016.

ix) Information Material for educating the public regarding withdrawal of current currency notes of Rs 500 and Rs 100 and issuance of new series of currency  are required to be printed/copied in adequate quantity and distributed to the public / displayed in the banking hall / ATM kiosks.

x) Banks should identify the staff for managing the exchange counters and brief them properly about the scheme and the procedure to be followed. 

xi) Banks should provide adequate number of note counting machines, UV Lamps, note sorting machines etc. at their counters to take care of the work load and timely detection of counterfeit notes. 

Also read | Know where you can use demonetised Rs 500 and 1,000 bank notes till November 11

3. Action to be taken on November 10, 2016

a. Bank branches will commence normal operations on November 10, 2016.

b. Banks have to accord top priority to provide facility for exchanging / accepting deposits of Specified Bank Notes and open additional counters to meet the public demand and keep the counters open for extended ours, if necessary. Maximum staff should be deployed for this purpose. If necessary banks may consider hiring retired employees for a temporary period to take care of additional work load.

c. Provision of Exchange Facility:

The specified bank notes held by a person other than a banking company referred to in sub-paragraph (1) of paragraph 1 or Government Treasury may be exchanged at any Issue Office of the Reserve Bank or any branch of public sector banks, private sector banks, foreign banks, Regional Rural Banks, Urban Cooperative Banks and State Cooperative Banks for a period up to and including the 30th December, 2016, subject to the following conditions, namely:—

(i) the specified bank notes of aggregate value of ₹ 4,000/- or below may be exchanged for any denomination of bank notes having legal tender character, with a requisition slip in the format specified by the Reserve Bank and proof of identity; the limit of ₹ 4,000/- for exchanging specified bank notes shall be reviewed after fifteen days from the date of commencement of this notification and appropriate orders may be issued, where necessary;

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(iii) there shall not be any limit on the quantity or value of the specified bank notes to be credited to the account maintained with the bank by a person, where the specified bank notes are tendered; however, where compliance with extant Know Your Customer (KYC) norms is not complete in an account, the maximum value of specified bank notes as may be deposited shall be ₹ 50,000/-;

(iv) 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;

(v) 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;

(vi) cash withdrawal from a bank account over the counter shall be restricted to ₹ 10,000/- per day subject to an overall limit of ₹ 20,000/- a week from the date of the notification until the end of business hours on 24th November, 2016, after which these limits shall be reviewed;

(vii) there shall be no restriction on the use of any non-cash method of operating the account of a person including cheques, demand drafts, credit or debit cards, mobile wallets and electronic fund transfer mechanisms or the like;

(viii) withdrawal from Automatic Teller Machines (hereinafter referred to as ATMs) shall be restricted to ₹ 2,000 per day per card up to 18th November, 2016 and the limit shall be raised to ₹ 4,000 per day per card from 19th November, 2016;

(ix) any person who is unable to exchange or deposit the specified bank notes in their bank accounts on or before the 30th December, 2016, shall be given an opportunity to do so at specified offices of the Reserve Bank or such other facility until a later date as may be specified by it.

Also read | Demonetisation of Rs 500, Rs 1000 notes: Bankers and industry leaders welcome move

(x) Business Correspondents (BCs) may also be allowed to exchange Specified Bank Notes upto ₹ 4000/- per person as in the case of bank branches, against valid identity proof and requisition slip. For this purpose banks may, at their discretion, enhance the cash holding limits of BCs at least till December 30, 2016.

(xi) While crediting the value of Specified Bank Notes to Jan Dhan Yojna Accounts, the usual limits will apply mutatis mutandis.