Demonetisation countdown to day 50: Banks want cash curbs to stay beyond 30 Dec

Banks have asked the government to extend the curbs on cash withdrawal beyond the deadline of 30 December as there is not enough currency notes in the system yet to meet the demand from customers. After the demonetisation of Rs 500 and Rs 1,000 notes 8 November, there has been a cash crunch in the country as printing of replacement notes at the government and RBI-owned presses have not been able to keep pace with the demand. The demonetisation had sucked out about 86 percent of the currency in circulation. In order to help banks, the government had restricted the withdrawal at Rs 24,000 per account per week from the branch and Rs 2,500 per card at ATMs. According to a report in The Indian Express, now the banks want the curbs to stay until there is sufficient currency notes available in the system. The government had earlier indicated that the limits will be revoked after 30 December, when the deadline for depositing old currency notes with banks ends. [caption id=“attachment_3107190” align=“alignleft” width=“380”]  Representational image. Reuters[/caption] The report says there is a growing consensus among bankers that the restrictions would have to continue even in the New Year so as to maintain orderly working at the banks. According to a banker quoted in the report, these restrictions are necessary as otherwise the public might flock to the ATMs and banks to withdraw cash, while there is no currency notes available. “That will become a problem,” the banker has been quoted as saying in the report. The Indian Banks’s Association (IBA), however, has said it has not given any written representation to the government on this. Earlier PTI haad reported that the restrictions are likely to continue beyond 30 December. Banks at many places are not in a position to disburse even the current limit of Rs 24,000 per week due to cash crunch and are rationing the valid currency depending on cash availability. If this limit is withdrawn for individual and businesses from 2 January, it is unlikely that banks would be able to disburse the higher demand for valid currencies given the current cash position. “Most of us think that the withdrawal limit would not be completely withdrawn. It is a possibility that it could be relaxed if the cash situation improves,” said a senior public sector bank official. At a time when banks are struggling to meet the demand of individual customers, it would be impossible to service MSME and big corporates which requires cash in large quantity, the official said, the practical way would be to relax it gradually. Recently, SBI Chairperson Arundhati Bhattacharya had also indicated that restriction on withdrawals cannot be lifted entirely unless more cash is made available to banks. After the demonetisation of high value Rs. 500/1000 notes, the government has fixed a limit of Rs. 24,000 per week on withdrawal from bank accounts and Rs. 2,500 per day from ATMs in view of the currency crunch that followed. The government and the RBI has not specified when the restrictions will be withdrawn. Finance Secretary Ashok Lavasa had said the withdrawal cap would be will be reviewed after December 30. Even bank unions are also of the opinion that the restrictions cannot be done away with in one go. All India Bank Officers’ Confederation (AIBOC) General Secretary Harvinder Singh had also said that in all likelihood the restriction on withdrawal would continue for some more time in the best interest of banks as well as customers at large. The situation of currency supply is known to everyone and it would be difficult to lift the limit from January 2, Singh said, adding that SME and small businesses are waiting for cap to go so that they can withdraw as per their requirement. Reserve Bank of India has infused Rs. 5.92 lakh crore in the banking system between November 9 and December 19 against Rs. 15.4 lakh crore of scrapped notes. According to RBI, banks had got deposits of Rs. 12.4 lakh crore defunct notes by December 10. (With PTI)