Two days after the government and the RBI issued a directive to banks to ensure that individuals depositing over Rs 5,000 in demonetised Rs 500 and Rs 1,000 notes explain to at least two bank officials why they took so long to deposit these notes, the central bank Wednesday reversed the order following protests by customers.
The department of economic affairs in the finance ministry, which simultaneously issued the circular along with the RBI on Monday, maintained silence on the issue on Wednesday, putting the onus on the RBI to announce the reversal of the order.
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In the 60th communication issued by the RBI-finance ministry combine since the currency withdrawal decision was announced on November 8, the RBI said in a one-line order, “on a review of the above, we advise that the provisions of the above circular will not apply to fully KYC-compliant accounts.” The RBI issued the circular retracting the order following a communication from the government, an RBI source said.
Bank customers who went to deposit old notes on Tuesday were questioned by bank officers about the source of income and why the notes were not deposited earlier.
“Most customers were waiting for the queues in front of branches to shorten to deposit old notes. Customers took umbrage at the sudden change in policy. Many of them complained that they went by the earlier assurances of the government and the RBI that they had time till December 30 to deposit old notes. Some of the branch managers were also confused about handling the situation,” an official of a nationalised bank said.
On Monday, the RBI had said the explanation to be offered by customers to bank officials on deposits over Rs 5,000 “should be kept on record to facilitate an audit trail at a later stage”. An appropriate alert also should be raised in CBS (core banking system) to that effect so that no more tenders are allowed, it said. Since November 8, the government has repeatedly advised people not to panic, spread out their transactions and freely deposit cash up to Rs 2.5 lakh without inviting tax scrutiny.
Prime Minister Narendra Modi had assured on November 8 that “persons holding old notes of Rs 500 or Rs 1,000 can deposit these notes in their bank or post office accounts from November 10 till close of banking hours on December 30, 2016 without any limit. Thus, you will have 50 days to deposit your notes and there is no need for panic. After depositing your money in your account, you can draw it when you need it.”
On November 11, Finance Minister Arun Jaitley had urged people not to rush in the initial days to deposit old notes. “We do believe that there is no need to rush in the initial days because people have a lot of time till December 30 with the entire banking and post office system and therefore more the deposits and the (note) exchanges are spread out, the more will be the convenience to the people itself,” Jaitley had said.
Banks have already stopped over-the-counter exchange of the discontinued notes following a directivefrom the government and the RBI. The government also went back on an assurance that daily cash withdrawal limits from automated teller machines (ATMs) would be increased. There are indications that the government and the RBI will retain the cash withdrawal limit of Rs 2,500 per day through ATMs and Rs 24,000 from a branch in a week.
Banking sources said the shortage of notes continues in semi-urban and rural areas and it may take a few months to attain normalcy. “These restrictions will only go away when there’s sufficient amount of bank notes in the system. Until and unless that happens, they cannot take away the restrictions. The moment they take away the restrictions, everybody will want to go and draw out a lot. That becomes a problem,” SBI chairman Arundhati Bhattacharya said in an interview last week.
RBI: Notes worth Rs 5.92 lakh cr issued
Mumbai: The RBI announced that notes worth Rs 592,613 crore have been issued to public either over the counter or through ATMs from November 10 to December 19.
“The Reserve Bank has issued to the banks and their branches, for distribution to the public, a total of 22.6 billion pieces of notes of various denominations of which 20.4 billion pieces belonged to small denominations of Rs 10, Rs 20, Rs 50 and Rs 100 and 2.2 billion belonged to higher denominations of Rs 2,000 and Rs 500,” the RBI said. ENS