RBI ATM withdrawal limits: It's not return to normal for common man yet; here's why

At the moment, the Reserve Bank of India (RBI)’s notification on Monday with respect to lifting the cash withdrawal curbs beginning 1 February do not really mean much for savings account holders who constitute the vast majority of banking customers. But, those merchants who maintain current accounts with banks will certainly have relief since limits have been completely removed for them with immediate effect.

For the common man, only the daily withdrawal limit from savings accounts, both from ATMs and branches, has been increased to Rs 24,000. This means, instead of Rs 10,000 earlier, one can withdraw a maximum of Rs 24,000 per day from ATM. But, that’s all he can withdraw for that particular week. Not just this, the RBI has specifically said banks can set their own limits as in the pre-demonetisation days. “Banks may, at their discretion, have their own operating limits as was the case before November 8, 2016,” said the notification.

There is a catch here. Under the current circumstances, banks are likely to use this leeway to continue with their cash curbs (even the permissible limits). Remember, post demonetisation, many banks were not honoring the permissible cash withdrawal limits on account of lack of cash availability particularly in lower denominations.

Although things have improved since then, even in metros, many ATM still remain cashless or dispense only Rs 2,000 notes. The point here is till the time cash withdrawal curbs are completely withdrawn for savings account holders (including the weekly withdrawal limit of Rs 24,000), once can’t say normalcy is restored in the common man’s life post note ban.

This is one part. The other is the tiff between the Election Commission and the RBI on the matter of letting political candidates draw more from their savings accounts for election purpose. The RBI rightly rejected this demand since such a provision will be akin to being partial to one set of customers and while favouring the other, no matter what the purpose is. If political candidates are given exemption, similar demands can come from other groups citing the criticality of their requirement such as companies associated with national security establishments, medical services and educational institutions. If the restrictions are removed, this should be for all.

What is more interesting is the suggestion that EC could have asked RBI to let candidates open current accounts and enjoy higher withdrawal limit. “All EC needed to do was to insist on candidates operating current accounts for poll expenditure, for which the limit was Rs 1 lakh, much higher than the savings bank withdrawal limit of Rs 24,000 a week. It could have at most requested RBI to raise this limit to Rs 2 lakh, rather than making a rather impractical suggestion of increasing the savings account withdrawal limit by over 8 times,” a Times of India report said quoting an unnamed government official.

But, it is doubtful whether this suggestion could have been implemented in the first place since banks typically open current accounts for business purposes. For instance, according to Bank of Baroda website, current accounts “can be opened for sole proprietorship firms, partnership firms, private limited and public limited companies, Joint Hindu families, trusts, clubs, associates etc. satisfactorily introduced to the bank and on fulfilling laid down procedures and tendering required credentials.” Can a politician open this solely for the purpose of poll expenditure?

Coming back to the cash crunch, though things have improved, it might take more time before the cash curbs are fully withdrawn in its true sense since the supply of currency notes are yet to match the requirement. To be sure, cash supply has improved of late. As this MoneyControl report says quoting an unnamed banker, “The availability of funds has improved from levels seen in November and we expect things to get even better by the end of this month.” According to the report, the daily supply of currency was to the tune of Rs 150 crore for each bank in large metros prior to demonetisation, which fell to less than Rs 10 crore per day for most banks before improving to Rs 55 crore per day in key cities like Mumbai, Delhi and Kolkata now.

The Monday notification can thus summarised to be an increase of daily withdrawal limit to Rs 24,000 from Rs 10,000 for savings bank per day and no cap for current account holders. But, it is no way the end of cash withdrawal curbs for common man and restoration of normalcy in daily lives, not yet, as some BJP leaders have claimed already (read here ).