The RBI has been issuing circulars regarding demonetisation at an amazing rate. [Looks like someone has already done it here – in the outline.]
This is a huge task (I didn’t realise there were 30 of these circulars!), but I’ll start with a couple now and try to link to the others in due course as time permits.
First a few jokes
On Whatsapp: “With withdrawal of their circular issued yesterday by Reserve Bank of India it has become reverse bank of india”
DCM (Plg) No. 1911/10.27.00/2016-17 December 21, 2016
Please refer to our circular DCM (Plg) No. 1859/10.27.00/2016-17 dated December 19, 2016. On a review of the above, we advise that the provisions of the above circular at sub para (i) and (ii) will not apply to fully KYC compliant accounts.
DCM (Plg) No. 1859/10.27.00/2016-17 December 19, 2016
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:
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.
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.
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.
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.
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.
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.
DPSS.CO.PD.No.1515/02.14.003/2016-17 December 16, 2016
DPSS CO.PD.No.1516/02.12.004/2016-17 December 16, 2016
DBR.AML.BC.48/14.01.01/2016-17 December 15, 2016
A reference may be made to the following provisions of the Master Direction on Know Your Customer (KYC):
(i) Section 8(d) and (e), wherein it is mentioned that concurrent/internal audit system of the Regulated Entities (REs) has to verify the compliance with KYC/AML policies and procedures and submit quarterly audit notes and compliance to the Audit Committee,
(ii) Section 23, wherein instructions on operation of ‘Small Accounts’ are given, and
(iii) Section 67, wherein it is advised that the Permanent account number (PAN) of customers shall be obtained and verified while undertaking transactions as per the provisions of Income Tax (I.T.) Rule 114B applicable to banks, as amended from time to time. Form 60 shall be obtained from persons who do not have PAN. It is clarified that in terms of I.T.Rule 114 B, transactions include opening of accounts with banks, NBFCs, etc;
2. It has been brought to the notice of the RBI that strict compliance with the above provisions is not being ensured in some cases. In view of this, REs are advised as under:
(i) They shall strictly comply with the extant instructions stipulated at Section 8(d) and (e) of the Master Direction;
(ii) In respect of ‘Small Accounts’, the prescribed limits/conditions shall not be breached and compliance therewith shall be strictly monitored. If any customer desires to have operations beyond the stipulated limits, the same shall be allowed only after complying with requirements for opening a normal account including completion of CDD/KYC procedures detailed in Sections 16/17 and provisions of Section 67 of the Master Direction which include quoting of PAN/Form 60 while opening an account with a bank, NBFC, etc. If any account is rendered ineligible for being classified as a small account due to credits/balance in the account exceeding the permissible limits, withdrawals may be allowed within the limit prescribed for small accounts where the limits thereof have not been breached
(iii) BSBD Accounts (PMJDY accounts are akin to BSBDAs), which are not KYC compliant accounts are to be treated as ‘Small Accounts’ and are subjected to the limitations applicable to such accounts. Hence, for allowing normal operations in such accounts, the procedures explained at (ii) above are to be complied with. If any account is rendered ineligible for being classified as a small account due to credits/balance in the account exceeding the permissible limits, withdrawals may be allowed within the limit prescribed for small accounts where the limits thereof have not been breached.
(iv) In respect of KYC compliant accounts where the required CDD procedure has been complied with, REs shall ensure compliance regarding quoting of PAN/obtaining of Form 60 for all transactions in terms of I.T.Rule 114 B which includes opening of accounts with banks, NBFCs, etc. No debit transaction, transfer or otherwise shall be allowed in accounts which do not comply with the above mentioned requirements. To begin with, this rule shall be strictly applied in accounts where both the thresholds listed below are reached:
- balance of rupees five lakh or more; and
- the total deposits (including credits by electronic or other means) made after November 9, 2016, exceed rupees two lakh.
3. It is clarified that provisions of Section 67 of the MD are subject to the exemptions granted to Government, Consular office etc., as provided in Income Tax Rule 114 B.
DCM (Plg) No. 1712/10.27.00/2016-17 December 13, 2016
Please refer to paragraph (5) of our circular DCM (FNVD) No.1134/16.01.05/2016-17 dated October 27, 2016 wherein it was stated that in order to facilitate identification of people abetting circulation of counterfeit notes, banks are advised to cover the banking hall/area and counters under CCTV surveillance and recording and preserve the recording.
2. In continuation to the above, the banks are further advised to preserve CCTV recordings of operations at bank branches and currency chests for the period from November 08 to December 30, 2016, until further instructions, to facilitate coordinated and effective action by the enforcement agencies in dealing with matters relating to illegal accumulation of new currency notes.
DCM (Plg) No.1226/10.27.00/2016-17 November 08, 2016
In terms of Gazette Notification No 2652 dated November 08, 2016 issued by Government of India, ₹ 500 and ₹ 1000 denominations of Bank Notes of the existing series issued by Reserve Bank of India (hereinafter referred to as Specified Bank Notes) shall cease to be legal tender with effect from November 09, 2016, to the extent specified in the Notification. A 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. Bank branches will be the primary agencies through which the members of public and other entities will be exchanging the Specified Bank Notes for Bank Notes in other valid denominations or depositing the Specified Bank Notes for crediting to their accounts, upto and including the December 30, 2016. Therefore, banks have to accord highest priority to this work.
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.
2. 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) The Specified Bank Notes stocked in ATMs, Cash Deposit Machines, Cash Recyclers, Coin Vending Machines, any other cash dispensing/receiving machine, CIT Companies and Business Correspondents attached to the branch will have to be called back forthwith. The sponsor banks of White Label ATMs will be responsible for recalling the Specified Bank Notes from the White Label ATMs sponsored by them.
iii) Banks should take steps to stop issuing Specified Bank Notes through their branches, business correspondents from November 09, 2016.
iv) All ATMs, Cash Deposit Machines, Cash Recyclers and any other machine used for receipt and payment of cash shall be shut on November 09 and 10, 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 November 09, 2016.
vi) Every banking company defined under the Banking Regulation Act, 1949 and every Treasury shall complete and forward a return in the format specified in Annex-1 showing the details of the Specified Bank Notes held by it at the close of business as on November 08, 2016, not later than 13:00 hrs on November 10, 2016 to the concerned Regional Office of Reserve Bank of India under whose jurisdiction the Head office of the bank is located. The return should also include details of Specified Bank Notes recalled from ATMs, Cash Deposit Machines, Cash Recyclers, Coin Vending Machines, CIT Companies, Business Correspondents, etc.
vii) Arrangement should be made by the branches to promptly deposit these Specified Bank Notes with the linked currency chest / RBI and get the amount credited to their account.
viii) Branches should estimate their cash requirement and obtain from the linked / nearby currency chest /RBI Bank Notes of other valid denominations.
ix) Cash Deposits machines / Cash Recyclers should continue to accept Specified Bank Notes upto December 30, 2016.
x) Information Material for educating the public regarding withdrawal of Legal Tender character of the Specified Bank Notes (as per Annex-2) and salient features of the Mahatma Gandhi (New) Series Bank Notes (Annex-3) are required to be printed/copied in adequate quantity and distributed to the public / displayed in the banking hall / ATM kiosks.
xi) Banks should identify the staff for managing the exchange counters and brief them properly about the scheme and the procedure to be followed. A copy of the FAQs provided in Annex-4 may be supplied to the staff manning the exchange counters.
xii) 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. As already advised vide our circular No DCM (FNVD) No.1134/16.01.05/2016-17 dated October 27, 2016, the banking hall, public areas and counters should be under CCTV surveillance and recording should be preserved.
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 hours, 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 December 30, 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;
(ii) 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/-;
(iii) 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;
(iv) 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;
(v) 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 November 24, 2016, after which these limits shall be reviewed;
(vi) 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;
(vii) withdrawal from Automatic Teller Machines (hereinafter referred to as ATMs) shall be restricted to ₹ 2,000 per day per card up to November 18, 2016 and the limit shall be raised to ₹ 4,000 per day per card from November 19, 2016;
(viii) any person who is unable to exchange or deposit the specified bank notes in their bank accounts on or before the December 30, 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.
(ix) 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.
(x) While crediting the value of Specified Bank Notes to Jan Dhan Yojna Accounts, the usual limits will apply mutatis mutandis.
4. Reporting Mechanism
Each bank branch exchanging Bank Notes in the denominations of ₹ 500/- and ₹ 1,000/- shall report at the close of business on each day starting from November 10, 2016 till the closure of the scheme on December 30, 2016 (or till any other date thereafter as may be advised by RBI) by email or Fax to their Controlling Office a statement as per Annex-6 showing the details of Specified Bank Notes exchanged by it and the respective Controlling Offices will aggregate these as per Annex-6A and report to the Department of Currency Management, RBI, Central Office by email on a daily basis.
5. Banks may issue detailed instructions to their branches advising them to strictly adhere to the norms of the scheme and procedures laid down above. The staff at the branch level, particularly the tellers, should be adequately sensitized. For this purpose, information as available at our website (www.rbi.org.in) and Government of India website may be used. Staff should familiarise themselves with the FAQs (as per Annex-4).
6. Banks should make copies of information material (As available at Annex-2, Annex-3 and Annex-4) and distribute these to the public.
7. Bank should issue instructions to BCs, ATM Switch Operators and CIT Companies on various aspects of the above scheme relevant to them.
8. Banks should monitor the implementation of the scheme on a day to day basis through a monitoring cell headed by an Officer not below the rank of a General Manager, who will act as a Nodal Officer. The Contact details of the Nodal officer will be reported to the concerned Regional Office of RBI, with a copy to RBI Central Office, Mumbai through email as indicated below.
9. RBI has opened a Control Room at its Central Office for monitoring the progress and providing guidance to banks and members of public. The email id and telephone numbers of the Control room are as under:
Telephone No: 022 22602804 / 022 22602944