Demonetisation guidelines: Govt should end flip-flops and make up its mind
The frequent changes to guidelines is confusing not only for the consumer but even for the banks; it only serves to increase the friction between them
A week into the demonetisation process, the government seems to be finding it difficult to make up its mind on the guidelines for withdrawal and exchange of old notes. This is putting not just the common man but even bank staff, who have already been working overtime to meet the demand, in greater trouble.
The government has changed its withdrawal and exchange limits multiple times, putting banks that are already scrambling to meet the demand for cash into overdrive, says a report in The Economic Times.
The government had initially said customers can exchange up to Rs 4,000 of their old currency notes at the banks. This was later increased to Rs 4,500 only to be cut to Rs 2,000 on Thursday. Similarly, ATM withdrawal limit was first set at Rs 2,000, which was later increased to Rs 2,500.
Withdrawal limit from banks for savings account holders has also been changed. First it was set at Rs 10,000 per day and Rs 20,000 per week. In order to address the rising demand and calm the panic-stricken common man, the government later removed the daily limit and increased the weekly cap to Rs 24,000. For current account holders, the withdrawal limit is Rs 50,000. This was announced only on 14 November.
According to the ET report, above all, banks are setting their own limits as they are finding it difficult to meet the demand and control the worried crowd.
A private bank branch manager has told the newspaper that despite the government having increased the withdrawal limit from savings accounts, the bank decided to cap the withdrawal from the accounts at Rs 15,000 and current accounts at to 25,000.
The frequent changes made to the guidelines is adding to the confusion of the customers. The new guidelines and the banks' own limits, apart from increasing the friction between the consumer and the banks, will only inconvenience the customer. The friction between the customer and the bank staff will only heighten.
The government's flip-flops also reinforces the public perception that the process was initiated with no preparation whatsoever. The government has been saying that no large-scale preparation could have been done as any such move would have resulted in spilling the beans. Even if, for argument sake one believes this, it cannot justify the messy implementation, resulting in nearly 50 deaths.
After the announcement was made and at the first instance of trouble, many experts had foreseen and warned about such difficulties.
"...While the RBI website and government notification have a form appended, you cannot use it as banks have their own versions which add some more details and hence one cannot go prepared for the same. Some insist on writing the number of the notes as well as providing your phone numbers while others do not. Quite clearly this has not been thought of when the circular was issued," Madan Sabnavis, chief economist, CARE Ratings, had said in a Firstpost article on Monday.
The government should have at least pressed all possible tools and systems at hand into service to dissipate the evolving crisis and minimise the pain for the common man. Even that has not been done. The result is the policy flip-flops and unending troubles and confusion for the masses.
It is high time the government made up its mind at least on the guidelines. Otherwise, chances are the situation will spiral out of control and result in a full-fledged civil unrest.
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