This ordinance would provide the legislative backing for the demonetisation exercise.
It will make necessary changes to the RBI Act to allow for extinguishing central bank's liability with regard to issued currency that has been cancelled.
All notes carry RBI's promise to pay the bearer the amount of the value of the currency and it requires a legal change to end this liability.
The ordinance also seeks to make possession of more than ten notes of Rs 500 or Rs 1000 a penal offence attracting a monetary fine that could Rs 10,000 or five times the cash held, whichever is higher, a government official said.
The ordinance will have to be sent to the President and after his assent will come into force.