Government allows district co-op banks to clear their old currency stockpile

District co-operative banks, which were so far barred from exchanging scrapped Rs1,000 and Rs500 notes after they were found to possess huge doubtful stockpile of these notes, have now been allowed to exchange these with the Reserve Bank of India against new banknotes.

The government has allowed banks, district cooperative banks and post offices to deposit scraped Rs1,000 and Rs500 notes lying with them with the RBI and exchange these with new banknotes in order to meet cash needs of the sowing season.

A finance ministry announcement on Tuesday said banks, post offices and district central cooperative banks can deposit the scrapped Rs1,000 and Rs500 notes with the RBI within 30 days and exchange these for new notes.

"Specified bank notes may be deposited by such bank, post office or district central cooperative bank, as the case may be, in any office of the Reserve Bank, within a period of 30 days from the commencement of these rules, and get the exchange value thereof by credit to the account of such bank, post office or district central cooperative bank, as the case may be, subject to the satisfaction of the Reserve Bank of the conditions specified in the said notification and the reasons for non-deposit of the specified bank notes within the period under that notification," the finance ministry stated in an official notification.

The relaxation has been made to facilitate lending by cash-strapped cooperative banks during the current sowing season.

The relaxation is in view of the fact that nearly six months after demonetisation, DCBs, especially in Mahrashtra, are stuck with hundreds of crores of cash in old currency, since the RBI is refusing to accept these. 

An NDTV report quoting Nashik District Central Cooperative Bank said the bank still has a stockpile of Rs340 crore in old Rs500 and Rs1,000 notes.

RBI had refused this exchange the huge hoards with scrapped currency with these banks suspecting foul play by black money holders.