Black Money Current Affairs - 2019
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The minutes of meeting which had approved the demonetisation of Rs 500 and Rs 1000 currency notes has been revealed through RTI. The government had contested that demonetisation would help curb black money and a steep rise in Rs 500 and Rs 1,000 notes; check the circulation of fake currency and promote e-payments and financial inclusion.
Observations made by RBI
- RBI Directors had contested the government’s claim about curbing black money by highlighting that most of the black money is held not in cash but in the form of real sector assets such as gold or real estate and this move would not have a material impact on the assets.
- RBI Directors refuted the government’s argument about the growth in high denomination notes being much faster than the pace of economic expansion, by reasoning that when adjusted for inflation, the difference may not be so stark.
- RBI has stated that even though the incidence of counterfeiting is a concern, Rs 400 crore as a percentage of the total quantum of currency in circulation is not very significant.
Despite these reservations and disagreements, the RBI board had approved the demonetisation in larger public interest as it provided an opportunity to promote financial inclusion and digital payments. Further the government had assured the RBI directors that it would take measures to contain the use of cash and promote financial inclusion and electronic modes of payment.
The Department of Revenue (DoR), Finance Ministry has made it mandatory for banks and financial institutions to check original identification documents of individuals dealing in cash above prescribed threshold to weed out use of forged or fake copies.
In this regard, DoR has issued an official gazette notification making an amendment to Prevention of Money-laundering (Maintenance of Records) Rules.
The Prevention of Money Laundering Act (PMLA), 2002 forms core of legal framework to combat money laundering and generation of black money. The PMLA and its rules impose obligation on reporting entities like banks, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information to Financial Intelligence Unit of India (FIU-IND). Intermediaries like chit fund company, stock broker, cooperative bank, housing finance institution and non-banking finance companies (NBFCs) are also classified as reporting entities.
The new rule now requires reporting entity to compare copy of officially valid id produced by client with original and recording same on copy. It also has made mandatory for biometric identification number Aadhaar and other official documents requirement to be obtained by reporting entities from anyone opening bank account as well as for any financial transaction of Rs 50,000 and above. The same is also required for all cash dealing of more than Rs 10 lakh or its equivalent in foreign currency.
If valid document furnished does not contain updated address, utility bill like telephone, electricity, post-paid mobile phone, piped gas or water bill not more than two months old can be considered as a proof of address. Besides, property or municipal tax receipt, pension or family pension payment orders issued to retired employees by Government departments or letter of allotment of accommodation from employer can be also considered for same purpose.