Exchange of old Rs 500 and 1,000 notes is "clogging the banking system", sources had said.
Highlights
- Govt sources had said were considering stopping exchange of old notes
- Had said offer being misused, was clogging up the banking system
- In denial, government says does not want to trigger panic
There is no proposal as of now to stop the exchange of old 500 and 1000 rupee notes for new currency at banks, government officials have said.
The clarification came after senior government sources told reporters earlier today that the centre was considering stopping the over-the-counter exchange amid concerns over the offer being misused, and allowing only bank deposits for the old notes.
Sources in the government said, "the government does not want to send any signal which may set in panic among the public."
The exchange of notes, the sources said, was "clogging the banking system."
The limit on a one-time swap of the old bills for new ones was lowered to Rs 2,000 on Thursday.
Since Prime Minister Narendra Modi announced that high value notes were being pulled from circulation, a series of reports have exposed how people are moving from one bank to another to get new notes. The government has also acknowledged that there are signs of people with black or undeclared money using proxies to make the swap.
"You find the same people coming back again and again," Economic Affairs Secretary Shaktikanta Das said this week, pointing out that huge queues were preventing honest people from getting the cash they need.
Indelible ink which prevents multiple voting in election would be used, the Finance Ministry said, to ensure that people only change old notes for new ones once. But banks have reported a shortage of or no access to the inks and some have been using permanent markers.
The government has said that the cancelled bills must be deposited in banks by December 30. Originally it said that individuals could, for now, exchange up to Rs 4,000 worth of old notes for the new Rs 500 and Rs 2,000 notes. Within this week, that limit was raised to Rs 4,500 only to be brought down to Rs 2,000.
The cancelled notes accounted for 86 percent of the currency in circulation and the sudden reform has caused huge disruption to daily live, especially for the poor who are not covered by the banking system.
The majority of financial experts have supported the reform and commended its intent, but say there is increasing evidence that the government failed to anticipate or prepare for how hard people would be hit.