Political Science · Political Institutions in India
The notification of 8 November 2016 demonetising the 1000 and 500 rupee notes was issued under which section of the RBI Act 1934?
ASection 26(2) ✓ Correct
BSection 25(2)
CSection 26(3)
DSection 25(3)
Correct answer: (A) Section 26(2) — The demonetisation notification was issued under Section 26(2) of the RBI Act 1934.
Explanation
★The demonetisation notification was issued under Section 26(2) of the RBI Act 1934.
★Section 26(2) lets the central government, on the RBI Board's recommendation, declare notes to cease to be legal tender.
★The government used this power to demonetise the 1000 and 500 rupee notes in November 2016.
★The Supreme Court upheld this exercise of the power by a majority in 2023.
★Section 26(1) makes bank notes legal tender, so the demonetisation power is in 26(2).
★The other sections cited do not carry this demonetisation power.
★So Section 26(2) is the correct legal basis.
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