Demystifying the Rs 5000 guideline with Logic behind the move

Guideline: If a person deposits any amount exceeding Rs 5000, in aggregate(multiple deposits), in a bank account, then he/she shall be required to explain in front of 2 bank officials the reasons for not depositing the cash till date and the officials will deposit the cash only when they are satisfied about the reasons.

Logic: Since hoarders of black money would now be in a rush to deposit all the cash lying with them, the one time deposit window will ensure creation of necessary audit trail for further investigation of such deposits.

Few people are also assuming that some amount of black money may not be deposited, which will be later on cancelled by the RBI(since not deposited) and will improve the finances of RBI. Even though it has been categorically clarified by the Governor that RBI have no plans to transfer the undeposited legal tender to Government as special dividend, still cancelling of undeposited money will improve the balance sheet of RBI. Even though without dividend, reserves could be transferred to government if the Board approves.

Merit: The explanation and the deposit process will be kept on records for an audit trail. The audit trail will help the tax officials in determining the genuineness of the deposits and further scrutiny of depositors at a later date, will assist the tax officials in knowing the source of cash generated in the bank accounts.

Demerit: The common person, who would have planned to deposit the money at a later stage to beat the long queues would unnecessarily be required to explain the source of cash generated.

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