Is Demonetisation Legal?

Thu, 8 Dec Pre-Open

   Previous Close   

   09:30 am   

   11:30 am   

   01:30 pm   

On the 8^th of November 2016 the central government declared Rs 500 and 1000 notes illegal. It was a well-intentioned move and was much appreciated. Some even considered it an event that would bring structural changes to the Indian economy.

The government thought the unreturned money would be a dividend for the government from RBI.

However, the execution of this drastic move has brought up concerns, one could even say it has created chaos. People are plum out of cash. The economy is swiftly heading for a slowdown. Reality is turning out to be painful.

To make matters worse, the government's estimates about the unaccounted money have been completely off the mark. It was expected that a big chunk of the total Rs 15 trillion of high denomination notes would not return to the banking system. However, that number has already crossed Rs 10 trillion.

Some think demonetisation is the biggest failed economic experiment in history, and they could be right. The execution certainly has been messy, and only time will tell the long-term impact it will leave on the economy.

But, there is another serious question about demonetization we must consider...

Is demonetisation legal?

Every currency note carries the RBI's promise to pay the bearer the amount of value of the note. This pledge is signed by the honorable governor of the central bank.

If the RBI fails to do that, it is considered a default by the RBI.

Can a mere declaration by the government nullify the pledge of the RBI governor to pay? In fact, unless the RBI Act is not amended, the RBI must be liable for the old notes even after 30th December 2016.

The government and central bank want to amend the RBI Act, of course. However, this can only be done after 30th December, when we know the exact state of unreturned currency.

And as we know the ongoing parliament session ends on 16th December, leaving the central bank only the Ordinance route to amend the act.

Until the ordinance is passed, the RBI is legally bound to fulfill its promise to pay.

We believe the central bank has an important role to play in the country's current situation.

After a disappointing start by imposing the 100% CRR on fresh bank deposits.

Yesterday, in the Monetary policy meeting (MPC) RBI decided to keep the repo rate unchanged at 6.25%.

The unchanged rate does not bother us. What bother us is the way our new governor refused to talk about the demonetisation.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

Top Gainers TodayTop Gainers over 1-WeekTop Gainers over 1-MonthTop Gainers over 1-YearTop Gainers over 3-YrsTop Gainers over 5-YrsTop Losers TodayTop Losers over 1-WeekTop Losers over 1-MonthTop Losers over 1-YearTop Losers over 3-YrsTop Losers over 5-YrsOnly BuyersOnly SellersMost Active StocksMost Popular Stocks52 Week High Stocks52 Week Low Stocks

INDICESBSE (Rs 0 to 1)BSE (Rs 1 to 2)BSE (Rs 2 to 4)BSE (Rs 4 to 10)BSE (Rs 10 to 20)BSE (Above Rs 20)BSE - AllBSE-30BSE-100BSE-200BSE-500BSE AutoBSE BankexBSE Capital GoodsBSE Consumer DurablesBSE FMCGBSE HealthcareBSE ITBSE MetalBSE Oil & GasBSE PSUBSE TeckBSE RealtyBSE PowerBSE A GroupBSE B GroupBSE Mid-CapBSE Small-CapBSE Basic MaterialsBSE Consumer DiscretionaryBSE IndustrialsBSE UtilitiesBSE Sensex 50BSE Sensex Next 50BSE Bharat 22BSE 150 MidCapBSE 250 SmallCapBSE 250 LargeMidCapBSE 400 MidSmallCapBSE AllCapBSE LargeCapBSE SmallCap SelectBSE 100 LargeCap TMCBSE InfraBSE ManufacturingBSE CPSEBSE Private BankBSE Diversified FinancialsBSE MomentumBSE Low VolatilityBSE QualityBSE Enhanced ValueBSE Divident StabilityS&P BSE IPOBSE SMEIPOBSE 100 ESGBSE CarbonexBSE GreenexNSE (Rs 0 to 10)NSE (Rs 10 to 20)NSE (Above Rs 20)NSE - AllNSE-50NSE ITNSE Nifty Midcap 50NSE JR. NiftyNSE Bank NiftyNIFTY Next 50NIFTY 100NIFTY 200NIFTY 500NIFTY MidCap 100NIFTY SmallCap 250NIFTY SmallCap 50NIFTY SmallCap 100NIFTY LargeMidCap 250NIFTY MidSmallCap 400NIFTY AutoNIFTY Consumer DurablesNIFTY FinanceNIFTY FMCGNIFTY MediaNIFTY MetalNIFTY PharmaNIFTY Private BankNIFTY PSU BankNIFTY RealtyNIFTY Oil & GasNIFTY SME EmergeNIFTY CommoditiesNIFTY CPSENIFTY EnergyNIFTY India ConsumptionNIFTY InfraNIFTY MNCNIFTY PSENIFTY Serv SectorNIFTY100 Liquid 15NIFTY Midcap Liquid 15NIFTY Midcap 150 Quality 50NIFTY50 Equal WeightNIFTY100 Equal WeightNIFTY100 Low Volatility 30NIFTY100 Alpha 30NIFTY Alpha 50NIFTY Dividend Opportunities 50NIFTY High Beta 50NIFTY Low Volatility 50NIFTY200 Quality 30NIFTY 500 Value 50NIFTY 100 Quality 30SECTORSAgricultureAirlinesAluminiumAsset Management CompaniesAutomobilesAuto AncillariesBanks (Private)Banks (PSU)BankingCementChemicalsDefenceDiagnosticsDronesEngineeringElectric VehicleElectric Vehicle BatteryEnergy SourcesESGEthanolFertilizersFintechFMCGFoodGreen HydrogenHotelsInfrastructureInsuranceInvestment and FinanceInvITIT (Large)IT (Others)LogisticsMediaMetalMiningIndia's Big Tech StocksIndian PharmaMNC PharmaPSUPaintPaperPlasticPowerRating AgenciesReal EstateREITsRenewable EnergyRetailingSemiconductorShippingSteelSugarSupply ChainTelecomTextilesTravel Support Services

10 results 25 results 50 results 100 results All results

Indian Share Market Update: Top Gainers and Losers