Suppose that the currency in circulation in India at the time from which the legal
tender status of the old 500 and 1000 rupee notes stood withdrawn was ~ 18 lakh
crores. If over the next 15 days, the public deposited~ 7 lakh crores of invalid currency
with banks and withdrew~ 2 lakh crores of new currency while banks deposited ~ 6 lakh
crores with the RBI, then the currency in circulation at the end of that period would
have been (assuming no other transactions which could have influenced it)
(a) ~ 12 lakh crores
(b) ~ II lakh crores
(c) ~ 13 lakh crores
(d) Cannot be determined
Answers
Explanation:
NEW DELHI: The government is likely to amend the Reserve Bank of India Act to extinguish the validity of Rs 500 and Rs 1000 printed before November 9 and a reference to this effect would be made in the upcoming Budget.
As part of the demonetisation process, there would be a law to make Rs 500/1000 notes invalid and it can be made effective from March 31, sources said.
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"In 1978, when the currency was banned, the law to annul the validity came ahead. This time the government acted under 26 (2)," sources said.
As per RBI Act Section 26 (2), the central government, on the recommendation of the Central Board of RBI, may by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender.