Come March 13, all cash withdrawal curbs to go

In a sign of things getting back to normalcy after demonetization of the high-value currency notes, the Reserve Bank of India (RBI) on Wednesday lifted all curbs on cash withdrawal limits with effect from March 13. It also doubled the cash withdrawal limit from savings bank accounts to Rs 50,000 per week from the current Rs 24,000 from February 20.

“It has been decided to remove the cash withdrawal limits in two stages. Effective February 20, the limit will be enhanced to Rs 50,000 per week, and then, effective March 13, there will be no limits,” said RBI Deputy Governor R Gandhi. The public, however, will need to wait till June 30 to know how many of the old notes have come back into the banking system.

“It is work in progress. There are 4,000 currency chests in the country and RBI also keeps its money at 19 different places. We also have to take into account the old currency notes from countries like Nepal and Bhutan that have special arrangement with Indian government,” said RBI Deputy Governor SS Mundra.

“There are two more deadlines of March 31 and June 30 (for specific categories) to deposit old notes. Only after calculating the money from these sources we will be able to tell the exact amount of deposits in old currency notes,” he said. Mundra also claimed that the newly-issued Rs 2,000 and Rs 500 notes have increased security features and are hard to copy.

“The fake notes available now are photo copies, and can be easily identified,” he said.

According to Rajnish Kumar, Managing Director, State Bank of India, there is sufficient hard currency reserve to meet the public demand. “Even when the restrictions on the current accounts were lifted, the additional cash that went out of these accounts was just Rs 100 crore. So it is more of a psychological barrier than anything else. People nowadays do not want too much of hard cash as electronic transactions are more easy,” he said.

There were reports that some of the small banks are still not getting sufficient stock of lower denomination notes to meet the requirement. Also that rural areas are still facing issues related to demonetization.

According to the RBI data, currency in circulation (CIC) increased for the third consecutive week since demonetization, even as the partial curbs on withdrawals remain. According to Kotak Research, “CIC for the week ending January 27 increased by Rs 29,236 crore, bringing the outstanding CIC to Rs 10.17 lakh crore.”

But this still falls short of the Rs 17.97 lakh crore of currency in circulation prior to the demonetization. The government said that it would not get the cash in circulation to these levels as it wants to encourage electronic payments. Bankers say they expect the currency in circulation to remain around Rs 14.5 lakh crore to Rs 15 lakh crore maximum.