Monday, 30th October 2017

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Money miracle asana

DeMo relief coincides with President poll parleys

By Our Bureau
  • Published 22.06.17

New Delhi, June 21: The Centre has all of a sudden permitted district central cooperative banks to deposit demonetised notes with the RBI till July 20, meeting a demand of parties based in Maharashtra in the middle of negotiations for votes in the presidential election.

The notification was issued on Tuesday night, a few hours after the Shiv Sena had shrugged off its initial scepticism and pledged support to the BJP's candidate for President, Ram Nath Kovind.

The announcement came less than 48 hours before another event: an Opposition meeting where Sharad Pawar's NCP, among others, is scheduled to make its stand clear on the President pick. The NCP is another Maharashtra-based party that wanted the freeze on the cooperative bank cash stash to be lifted.

Soon after the demonetisation was announced on November 8 last year, suspicions were aired that black money in banned notes was being deposited in a section of cooperative banks controlled by politicians to turn it white. The RBI then ordered the district central cooperative banks not to accept old notes beyond November 14, slamming shut a window that was originally scheduled to stay open till December 30.

However, between November 10 - the first day when banks actually started accepting the old notes - and November 14 - when the RBI stopped the cooperative banks from doing so - certain amounts of cash had already been deposited. Since then, such deposits have been lying in a state of suspended animation.

That amount may appear a drop in the ocean of cash that flowed back to the bank vaults but for individual cooperative banks, it is still a significant amount. In Maharashtra alone, according to the apex body for cooperative banks, banned notes of Rs 2,771.86 crore are parked in the name of such banks.

The Union finance ministry has now permitted the district central cooperative banks to deposit such notes with any office of the RBI till July 20. Banks and post offices have also been given permission to deposit with the apex bank notes collected till December 30.

The finance ministry notification says the deposits will be subject to "the reasons for non-deposit of the specified bank notes".

The suspense over the cash had agitated both the Shiv Sena and the NCP. The two Maharashtra-based parties had explained how cooperatives were in serious trouble and farmers and poor villagers were being adversely affected in the process, but their repeated pleas had fallen on deaf ears.

The Sena, which had been critical of the Dalit symbolism on the day Kovind's name was announced, suddenly declared its support yesterday, saying he had passed the party's personality test.

A government official described the gazette notification as routine, saying it was in accordance with a commitment the Centre had made to the Supreme Court. Last December, the government had informed the court that it would issue such a notification.

But six months have passed since that announcement, a gap that is making it difficult for the government to explain the issuance of the notification just when the presidential poll was heating up.

One economic reason was offered: the cooperative banks needed to recoup some of their losses before they could participate in the farm loan waiver programme the state government has recently announced. "The banks made it very clear informally that they would not write off any amount till the money lying with them was taken off their books," a finance ministry official said.

The presidential poll is on July 17 and suggestions of a deal could have been averted had the government waited for a month more.

Former finance minister P. Chidambaram tweeted: "Was the midnight gazette notification perfectly timed with garnering support for presidential election?"

The tweet ignited an indignant backlash from BJP supporters who blasted "the Gandhi family chamcha" for smelling a conspiracy.

The Sena did not make matters easier for the Centre: the Maharashtra ally claimed credit for the finance ministry's sudden decision.

Maharashtra minister and Sena leader Diwakar Raote had demanded last week that the demonetised notes lying with the district cooperative banks should be accepted by the RBI.