Hit hard by the demonetisation drive of Prime Minister Narendra Modi, several black money hoarders have found a new way to bypass the banking system norms and to turn their ill-gotten money into white.
Several co-operative banks in the country have not been computerised, physical ledger books are still used here.
According to a report in The Times of India, many of such banks are taking cash from customers and opening backdated fixed deposits (FDs).They are also issuing demand drafts (DDs) and pay orders against cash, mostly from politicians.
These entities were using a loophole, wherein the money against the DDs and pay orders issued by banks goes into a pool account, which is deemed to be the bank's. Since all banks are allowed to take cash from customers and exchange it with the new currency notes, these banks are helping people with unaccounted-for cash, which would otherwise have become worthless, the TOI report says.
The deal between these cooperative banks and people buying DDs and pay orders with cash is that they will not present these instruments to any other bank to encash. However, after March 31, the issuing cooperative bank will cancel the DDs and pay orders, and return cash to the holders of those instruments in the new notes.
The central bank, through a press release on Tuesday, warned all cooperative banks to strictly adhere to its instructions for withdrawal of the new notes. The RBI has informed the urban (through its regional offices) and state cooperative banks (through NABARD) about "the need to ensure strict compliance with the instructions issued".
