Q: Is it legal for banks to disallow cash withdrawals of bonafide account holders with sufficient balances in their accounts?
It is legal*. If it were not legal the courts would have already stayed the move. With the top lawyers that are in the disposal of the major opposition parties, would it not have occurred to them to move the court this way?
But, legality is not something constant. Its meaning and interpretation changes over time. Later this week the Supreme Court would start hearing the cases and it could in theory change the interpretation. Not likely or probable, but possible.
Government has not taken over your property - that money is still there in your account. Government has not frozen your bank accounts. You can do netbanking, online shopping, mobile commerce, cash transfers between accounts through cheques/NEFT/RTGS, deposit money, issue cheques etc with no restrictions. You are just limited in how much paper currency you can draw during this limited period.
* [I’m not a lawyer. Just a common man who likes to understand the law.]
Q: What will happen if all of the black money holders burn the money or do not submit at all? Wouldn't it lead to loss of money?
It could be good for India even if the people burn their black money. Normally there are 3 issues with burning money:
- It introduces a cash crunch as you take money off circulation
- It is a waste for the system - printing notes costs money
- It causes hardships in monetary planning as RBI will find it hard to know how much money is out there.
All the 3 cases are irrelevant in the present case. RBI is anyway going to burn the money and anyway taking these old notes off circulation. Since it is printing the new notes and sending through the system it also has better info how much money is sent into the system. Thus, you save the bank officials some time in burning it yourself.
In essence, it is providing free money to the government. Each note you carry is liability of RBI/Government and when you burn the liability, you are gifting the system. Assuming that government is printing 16 lakh crore worth of new notes in place of the 16 lakh crore worth of old notes, any amount that didn’t come into the bank is a gain for the government [figuratively, they can use the printed notes for social programmes] .
Also, a person burning the money in this case is likely to be involved in illegal activities and having that person lose money/have less power, is good for the society.
There will be some negative impact on the society though. That bad guy might have spent some of that money on luxury goods, cars and hotels. Now, those will see lesser sales and in turn will reduce the GDP. To compensate, the government could use the extra money it got and spend it on infrastructure investments - schools, hospitals, roads and railways. These could more than compensate for the GDP hit got by reduced consumption of the bad people.
(The author, Mr.Balaji Vishwanathan (formerly of Silicon Valley), is a Top Writer on Quora and a VP of Invento, a tech based start up)
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