‘Can deposit old notes worth ₹5K-plus only once till Dec 30’

PF deposits to earn lower interest this year, 4 crore employees impacted

NEW DELHI: The government has in new restrictions said deposits of more than Rs 5,000 in old Rs 500 and Rs 1,000 notes can be made in a bank account only once from now till December 30, the deadline for depositing old notes.

It was also decided in a meeting on Monday that Provident Fund subscribers will now get lower interest rate on their deposits this year as compared to last year. The provident Fund body — the Employees Provident Fund Organisation or EPFO — decided to give 8.65 percent interest rate for current fiscal year (2016-17). The move will impact over four crore employees who contribute part of their salary towards the provident fund kitty. Provident fund subscribers had received an 8.8 percent interest on their deposits last year (2015-16).

For salaried individuals, the employee provident fund is an important tool for savings towards retirement years. Every month, a salaried individual contributes 12 per cent of his/her salary to the EPF account the employer matches this. A part of the employer's contribution goes to into Employee Pension Scheme. The lower interest rate on provident fund deposits comes in the wake of a general decline in interest rate across different financial savings instruments, including bank fixed deposits and small savings schemes.

Prime Minister Narendra Modi had on November 8 suddenly abolished Rs 500 and Rs 1,000 notes to combat corruption and black money. The government had said at that time that people could deposit the old notes they were holding till December 30, while also allowing in phases the use of the banned notes at petrol pumps and some government utilities. All such use of old notes ended on December 15.

The new restrictions on bank deposits are aimed at checking large deposits of black or undeclared money into bank accounts as the deadline for deposits nears. With only 11 days to go, the new restrictions will allow only limited deposits and will also allow close scrutiny of the money deposited.

The RBI has said that more than Rs 5,000 in old notes will be credited only in bank accounts that are KYC compliant — KYC or Know Your Customer is a process by which banks get information about the identity and addresses of clients. The government has earlier said that any single deposit in old notes of over Rs 2.5 lakh in an account will attract income tax scrutiny. Since demonetisation was announced on November 8, a number of fake accounts with large deposits in banks have been unearthed by investigators.

It has given people holding black money one chance to come clean by declaring their old notes and paying 50 per cent in tax and penalty under what the government calls the Pradhan Mantri Garib Kalyan Yojana 2016.

The ban on Rs 500 and Rs 1,000 notes had taken out 86 per cent of the money in circulation or Rs 15.44 lakh crore. Almost Rs 13 lakh crore in old notes has returned into the system.

Meanwhile, the RBI said it is issuing a new batch of Rs 500 notes in Mahatma Gandhi (New) series with the inset letter R in both the number panels. The new notes will bear the signature of Urjit R Patel, the incumbent RBI Governor, and the year of printing ‘2016' printed on the reverse of the banknote.

In another development, media reports had suggested that the government would set a limit on the amount of cash that can be kept at home. The limit was speculated to be between Rs 3-15 lakhs. Experts were of opinion that India being a developing economy, it would be difficult to set a minimum limit. However, sources on Monday denied media reports that the government is setting a limit on keeping cash at home.

Despite several measures, common man is still bearing the brunt of demonetisation.

The first incident of looting Rs 5 lakh from an ATM van in the national Capital was reported on Monday from East Delhi's Pandav Nagar area. The bag contained Rs 5 lakh, all new currency notes of Rs 2,000 and Rs 500. Police have taken the footage from nearby shops to scan the CCTV records.