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Author Topic: MP High Court Summons RBI, Finance Ministry and eBay for Sale of Coins and Notes  (Read 6034 times)

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Offline EWC

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On Thursday, RBI informed MP High Court that under any circumstances, it is illegal to sell legal tender coins or banknotes for a premium (online or any other means). However, there's no law which prohibits people from doing so and finance ministry (i.e. parliament) may amend the law(s) as necessary. Since no official from finance ministry was present during the argument, high court has reserved the decision on this matter.

I think understand why this is going on - due to very high charges levied for change - and the legitimate wish to stamp that out

But are ALL charges to be prohibited?  How would that work?

I believe standard charges in the UK between customers and banks are in the 1% to 1.5% range (in or out) - which seems legitimate in contexts where branches have to cope with a lot of say slot machine traders, with a lot of heavy lifting in and out the vaults and vans. 

Even in the UK its rather a rip off if the transactions are 50 pound notes.........

Rob

BTW  Anyone with a serious interest in small change might find this interesting:

https://www.academia.edu/31132451/Maria_Graham_and_the_Politics_of_Small_Change


Offline dheer

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On Thursday, RBI informed MP High Court that under any circumstances, it is illegal to sell legal tender coins or banknotes for a premium (online or any other means). However, there's no law which prohibits people from doing so and finance ministry (i.e. parliament) may amend the law(s) as necessary.

Aditya

If there is no law, how is it illegal  ???
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Offline Bimat

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If there is no law, how is it illegal  ???

I think what they mean is there is no provision of punishment to those who are selling legal tender coins/banknotes for a premium.

This also means that coins which are part of proof sets/single coin sets issued by the four Indian mints are NOT legal tender, since they are surcharged!

Aditya
Caution. The low-hanging fruits are still there maybe for a reason.

Offline Bimat

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As promised elsewhere, here's my answer to Rob's question(s) :). There are two parts of it: First not exactly what Rob wanted to know, second, some recent developments after the demonetization decision by the government.

Part I:

The petition in the MP high court has nothing to do with demonetization, government asking people to pay some particular amount in case they want to deal in (high amount) of cash. The petition was filed much before demonetization was announced.

At one of the coin exhibition in Indore, someone saw dealers selling fancy number banknotes and commemorative coins (both legal tender) for a premium. He was curious to know if it was legal, and hence he approached RBI and also filed a complaint in police. It eventually resulted in a court case, proceedings of which are now with us.

The case itself has nothing related to government's role in distributing cash, charging for it etc. It solely deals with whether it is allowed to sell legal tender currency for a premium or not, if not, what's the punishment.

Part II:

After the demonetization decision was announced on November 8 of last year, there was an acute shortage of cash in the entire country, as almost 86% of the total cash became illegal tender. Indian currency presses did not have enough printing capacity to meet with the demand, which resulted in some undesirable consequences (discussed elsewhere already).

When the situation became bad, government suddenly started promoting cashless economy, which later turned into a less cash economy kind of thing.

Now comes the answer to your question.

Before demonetization, most of the banks (except a few private banks) did not charge any commission for withdrawing any amount from the bank (ATM or at the counter). Nor there was any restriction on cash transaction. Post demonetization, situation has changed significantly. Many private banks have increased transaction cost for high amount withdrawals (typically if the amount is above ₹150,000) from the counter. Also, the budget which was presented a couple of weeks back has imposed a 100% fine on cash transactions above ₹300k. When asked about how it is going to be implemented, the finance minister told that the receiver of the cash (more than ₹300k) will pay 100% fine in case found with dealing in excessive cash. For example, if a builder asks me to pay ₹1000k in cash and he's caught, he will have to pay a fine of ₹1000k to the government. The loophole in this system is that government relies entirely on the person who is giving him cash. Which means, if I register a complaint against the builder, then only IT department will take up the matter. If both the parties are fine with dealing in any amount of cash, then there's nothing which can really stop you from doing so. ::) So to me, it appears that the new law will not be very successful in reducing cash transactions.

Hope that somewhat answers your question? ;)

Aditya
Caution. The low-hanging fruits are still there maybe for a reason.

Offline EWC

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Many thanks Bimat for all this effort.   :)

Unfortunately it rather missed my key point.     :'(

It all gotten a bit complicated  - but give me a little time and I will try again 

Rob T

Offline EWC

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OK lets start at the beginning

Before demonetization, most of the banks (except a few private banks) did not charge any commission for withdrawing any amount from the bank (ATM or at the counter).

In the UK ordinary bank customers do not much need small change from the bank, and when they do need small amounts the bank will I think just pay it over.  Business customers however pay a transaction charge on all cash going into the bank or going out.  Typically 1% or 1.5%.  And this is not a new thing I think - as I understand it this was the case 50 years back, and probably much longer still.

When I travelled overland to India in 1978 I read an unofficial guide book which suggested getting hold of bags of small change before travelling to Ladakh - since one could sell it for a profit there.  I was not interested in making a profit I just thought it was numismatically rather interesting.  I never found out if it was true while in India, but of course I saw many people ran businesses selling small change in markets etc.

Some time later I gave a talk (it was to the Oxford University Numismatic club) and mentioned something about the matter.  The late Prof Spencer Smith (a coin collector and expert on Butterflies) took and interest, and delved into the matter on his next trip to Pakistan.  He walked into a bank and asked to get some bags of small change.  They could not or would not give him any, and told him he had to go buy it in the Bazaar.  Of course that should not be a surprise, why would people make a living selling it in bazaars if you could get it free, or cheaply, in a bank?  But it raises all sorts of questions, about how coin gets distributed in the economy, if, unlike the UK one cannot just walk into a bank and buy it at a cheap fixed price (1% or so)

Actually I raised this before on this group , and a member kindly informed me that quite a high premium is still charged by professional people who deal in cash/small change, but that the government is trying to stamp it out (?)

This sort of problem is by no means particular to the sub-continent.  Travelling through Italy in 1978 there was no small change at all, I was given sweets instead at shop counters!

So as things stand I think your statement above perhaps misleads? On the information I have, if bank commission has not been charged on paying out cash (in the form of small change) is it perhaps because often no small change was being paid out at all, in a routine sort of way?

Anyhow, I am not claiming of course to know what is going on!!!  Just trying to clarify my original question, which I repeat below

If the high court is trying to fix it so that there is no transaction charge on cash, it seems to me, from a British perspective, a rather strange thing to do, as such a (modest) charge is standard practice here, and does legitimately cover genuine costs in paying, holding, storing and transporting the physical product.  So - how does ithe high court propose these costs are met?

Rob T



Offline dheer

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It is like you have mentioned.

Business pay a fee for cash deposits. Generally there is none for withdrawal.

Small change is cost to bank and hence they are not encouraged to handle it. Banks can't charge for giving small change, Coins.

There is industry that runs on selling this at premium of 5% or 8% depending on denomination of coins.

The case in court is selling fancy notes or coins in market place at high price. If RBI that it is legal, then it is admitting that it currency is a commodity. People can buy or sell at price higher or lower than face value. The promise to pay nature take a beating.

http://coinsofrepublicindia.blogspot.in
A guide on Republic India Coins & Currencies