Lok Sabha passes Bill to make holding of old notes punishable

The volume of currency in India was extraordinarily large, says Arun Jaitley

The Lok Sabha on Tuesday passed a Bill, which makes holding of more than 10 old notes of Rs 500/1,000 denomination punishable with a minimum fine of Rs 10,000, with the government saying the aim was to check parallel economy using the scrapped notes.

Piloting the Specified Bank Notes (Cessation of Liabilities) Bill, Finance Minister Arun Jaitley said it will extinguish the government’s liability towards scrapped notes and also eliminate the possibility of their being used as parallel currency.

Jaitley said the volume of currency in India was extraordinarily large.

"We must move to a greater digitial economy and therefore free the economy from these vices....You cannot allow a parallel currency to operate in the market. So holding the currency beyond a specificed limit for research and numismatic purposes will be an offence. This is the rationale behind this bill," he said.

He added that the volume of cash which is 12.2 per cent of the GDP is very high as compared to other countries.

Responding to various questions raised by the members, Jaitley said discussions on demonetisation started with the RBI in February 2016 and later there used to be weekly meetings to oversee the preparations.

The design for new notes was approved by the RBI and the government in May 2016, he said, adding utmost secrecy was maintained keeping in view the nature of the exercise.