On 30 Jan 17, RBI announced that it would be removing withdrawal restrictions on ATMs, from 01 Feb 17. Also with immediate effect, withdrawal limits on current accounts, cash credit and overdraft accounts stood revoked
How long will it take to remonetize?
On 30 Jan 17, RBI announced that it would be removing withdrawal restrictions on ATMs, from 01 Feb 17. Also with immediate effect, withdrawal limits on current accounts, cash credit and overdraft accounts stood revoked. Withdrawal limits for savings accounts would continue at Rs 24,000 per week. However, customers can now withdraw the full amount, with one visit to the ATM. The RBI also announced that banks could set their own withdrawal limits for ATMs, depending on local conditions.
Cash and Elections?
Five states (UP, Punjab, Uttarkhand, Goa and Manipur) shall be holding elections, in the next few weeks. On 25 Jan 16, the ECI had written to the RBI requesting cash withdrawal limits of candidates in election-bound states should be increased from Rs. 24,000 per week to at least Rs 2L per week.
ECI instructions lay down that all candidates are required to maintain a separate account, to reflect all receipts and payments connected with the election. Stipulated expenditure for candidates is Rs. 28L for UP, Punjab and Uttarkhand and Rs 20L for Goa and Manipur. With the earlier limits on withdrawal, candidates in the election, were unable to meet even the stipulated expenditure.
Will this Alleviate Cash Woes?
The slow speed with which currency is being replaced has had an adverse impact on India’s cash economy. The withdrawal of cash limits will alleviate the cash woes, particularly of working capital of businesses heavily dependent on cash.
The need for cash for elections has placed additional pressure on the RBI to increase cash supply through banks. In recent weeks, at least two caches of cash were apprehended from vans, heading to the election zone.
A difficult situation was created, when electoral candidates were unable to withdraw even stipulated election expenditure amounts from their bank accounts. Though the RBI has now released cash withdrawal limits from ATMs, it remains to be seen if cash supplied by the RBI, will satisfy the demands of citizens.
Sources: Asian Age, Business Standard, Economic Times