India cooperative bank
India cooperative bankIANS

Just a day after the Income Tax Department (I-T Department) informed the Reserve Bank of India (RBI) that a number of cooperative banks were found tampering with cash records in the wake of demonetisation, the government took a harsh decision by prohibiting cooperative banks from accepting deposits under the new tax amnesty scheme Pradhan Mantri Garib Kalyan Yojana (PMGKY). 

Cooperative banks severely hit due to demonetisation

On Friday, I-T Department disclosed in a report detailing the anomalies it uncovered during the agency's investigation into cooperative banks' role in money laundering after the government's note ban announcement in November last year. 

Tax sleuths said they found "serious unexplained difference between the old notes reported to the RBI and the physical stock" available with the banks to the tune of multi-crore rupees.

On Saturday, the government amended the notification for PMGKY 2016 and said: "Application for the deposit in the form of Bonds Ledger Account shall be received by any banking company, other than Co-operative Banks, to which the Banking Regulation Act, 1949, applies."

Earlier, I-T officials said they apprehend the "excess reporting of old notes had serious potential for large-scale conversion of old notes for new notes even after December 30, 2016 (the last date for the validity of the old notes)." 

The RBI had on December 30 asked all banks to deposit all old notes received till that date with RBI chests by the next day, ie., December 31, and also said that old notes cannot form part of the closing cash balance of banks as on December 31, 2016.

"A big possible window that would have allowed conversion of black money into white, post-demonetisation, by the cooperative bank system was plugged to a larger extent after the I-T department detected these instances. In cases where such an activity has already taken place, the investigation is ongoing and notices have been issued," I-T officials had said.