Note Ban Crisis: What Happens to Those Without Bank Accounts?

Can the government roll out a policy that does not provide for all those who do not have bank accounts?

People without a bank account have been left in the lurch after demonetisation. (Photo: AP)

Geeta, a domestic helper in her late 40s, works at a house in West Delhi’s Janakpuri area. When the news about Rs 500 and 1,000 ceasing to be legal tender reached her, she was distraught.

Approaching her employer, Geeta begged that her old notes be exchanged. On asking why she couldn’t go and deposit her own money, she replied that despite having a bank account, she doesn’t trust it.

“Also, if I go to the bank, who will do my work?”

Has the move disenfranchised the poor? (Photo: The Quint/Rhythm Seth)

The government’s demonetisation move has rendered many helpless, many cashless. Geeta, at least, has a bank account. What happens to those without one?

Also Read: Currency Ban Is Tearing Rural Banks Apart

Has the Move Disenfranchised the Poor?

There’s nothing you can do if you don’t have a bank account. According to the new limit, you can’t exchange more than Rs 2,000, which is a serious problem. This effectively means destroying your assets.

Alok Prasanna Kumar, Visiting Fellow, Vidhi Centre for Legal Policy

Kumar explains that the money one holds is what the Reserve Bank of India owes the person holding it. By banning the notes, the government has basically cancelled that debt.

Also Read: The Currency Ban Is Not Backed by the Law, Says Indira Jaising

He questions the legality of the move through Article 300A of the constitution, which states that “No person can be deprived of his property except by authority of law.” In that manner, “limiting exchange of old notes effectively means that you have destroyed the people’s property rights,” he says.

Demonetisation, then, implies extinguishing public debt in the hands of someone who has a demonetised note, which cannot be done without the authority of law.

India still hosts a large amount of people, especially in its hinterlands, who do not have a bank account. While non-account holders can exchange upto Rs 2,000 over cash counters in banks, what happens if somebody has more money than that to exchange?

‘They Will Now Resort to the Black Market’

In major cities like Delhi and Bombay, there are banks that open an account for a person on the spot. “If the person has a valid ID proof, we open the account for them. It might take more time than usual, but it gets done,” a banker in a Delhi branch of the State Bank of India told The Quint.

Dr Jayati Ghosh, Professor of Economics at the Centre for Economic Studies and Planning at Jawaharlal Nehru University thinks this case is an exception.

“It’s really difficult for people in villages and rural areas to even find a bank and open an account there. I don’t know how many banks will actually open them. What about migrants who come to a city but there IDs are somewhere else? Has any provision been made for them,” she asks.

Also Read: Currency Chaos: Mr Jaitley & Co, Stop Contradicting Each Other

Calling the policy an attack on the poor, Ghosh goes on to make another argument:

The move has left people without bank accounts cashless. (Photo: The Quint/ Rhythm Seth)

Concurring with Ghosh’s point, economist Dipankar Dasgupta believes that somebody without an account will either look to a friend or relative who can deposit the money in their own account, or indulge in some sort of a “black transaction.”

Daily wage workers, sabziwaallahs, even domestic help, prefer keeping some amount of their income in their houses for ready disposal. Has the government, with one move, disenfranchised their right to hold their wealth?

The Error in Judgment

“Legally, the move does not override any constitutional right,” says senior Supreme Court lawyer Sanjay Hegde.

What’s the legality of the move? (Photo: The Quint/Rhythm Seth)

What Hegde is saying is that a person without a bank account would not have faced any shortfall had the banks simply exchanged the entire amount of their now-defunct currency with the new notes.

“The government has basically left the poor without any option. Their best option is for them to find a dalaal who will exchange their notes in black,” Dr Ghosh says.

The chaos that has ensued ever since the announcement is ample proof that implementation has been poor; a point that Hegde agrees with.

Also Read: Currency Ban Blues: What’s Behind Jaitley’s Deafening Silence?

The problem is at the administrative level. Why didn’t the government open bank facilitation centres outside banks? There could have been a separate counter for opening new accounts. All this hasn’t been done.

Sanjay Hegde, Senior Supreme Court Lawyer

While the Supreme Court recently stayed a Public Interest Litigation (PIL) against the policy, there has been talk of other PILs being filed to withdraw the currency ban.

“Now, the 1978 demonetisation was upheld by the Supreme Court. It is highly unlikely that a court will ultimately invalidate the government’s action,” Hegde asserts.

Why didn’t the policy, which is intended to be a “surgical strike” on black money, take into account all those people who chose not to enter the banking system?

What hope, then, is left for the millions of people in the country who have been left without accounts, cash or any peace of mind?