It was declared that the notes would cease to be legal tender by the time the banks closed on that day. The next day, that is January 17, all banks and treasuries of governments were kept closed, like they are closed today.
HM Patel, a former finance secretary and also hailing from Gujarat, was the finance minister that time, and Desai was heading the newly formed Janata government after defeating the Congress post-Emergency debacle. And he was pretty kicked about curbing black money though there were whispers that he was taking on the opposition Congress and other parties by “freezing their secret funds”.
Between now and then, however, there is a huge difference: Desai didn’t have the backing of then RBI governor I G Patel unlike Modi, who is supported by Urijit Patel.
To implement the scheme, the government brought in the High Denomination Bank Notes (Demonetisation) Act, 1978. This Act banned the transfer and receipt of high denomination bank notes. Any contravention, such as false declaration by depositors, was made punishable and could send a person to three years in jail.
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