RBI Withdraws Restriction on Deposits Above Rs 5000, Triggers More Confusion

Reserve Bank of India (RBI) withdrew the restriction on deposits above Rs 5000 in old notes and came up with a new rule that stated that for KYC compliant users the limit will no longer be applied. Yesterday, RBI came up with the rule according to which deposits above Rs 5000 in old Rs 500 and Rs 1000 notes can be done only once until 30 December 2016 and that two after giving ‘satisfactory explanations’ to bank officials.

RBI also stated that all the defunct currency can be deposited in ‘Pradhan Mantri Garib Vikas Yojna‘ and the depositors will have to pay 50% of the amount of tax plus penalty and surcharge. The government will keep another 25% share in zero coupon bonds for 4 years and the rest will be given to the owner.

However, the endless modifications in Demonetization policies triggered an outrage and people started questioning the authorities. Rather than stating a reason, RBI just withdrew the restriction from KYC compliant account holders saying that non-KYC clients are hard to track and this could infuse excess of black money in the system.

This is not the first time that RBI and Central Government have come with illogical ideas to make this demonetization drive successful and the policies that we have to comply with today were not the same when PM Narendra Modi announced the demonetization of Rs 500 and Rs 1000 notes on 8th December.

Here is how the policies have changed in the last six weeks.

Cash Exchange

On 8th November, Government announced that Rs 4000 worth of old notes can be exchanged with new ones from banks and post offices each day till 30 December.

On 13 November, the limit got increased to Rs 4500.

On 17 November, Government reduced the limit to Rs 2000 which resulted in more chaos in India.

On 24 November, exchange of old notes was banned and only foreigners were allowed to Exchange Rs 5000 per week.

So, we were allowed to exchange the old currency till 30 December and the Indian Government ended up scrapping the rule by 24 November.

Cash Withdrawal

On 8th December, Government announced a withdrawal limit of Rs 2000 per day from ATMs. While withdrawing cash from a bank, there was a limit of Rs 20,000 weekly and the daily limit was Rs 10,000.

On 13 November, withdrawal limit from ATMs was increased to Rs 2500 while limit from banks was increased to Rs 24000.

Indian Government said that they have increased the limit to help common people but they forgot to issue more new notes to several banks. The banks that got sufficient cash to distribute, started ‘under the table’ deals and made common man suffer more in long queues.

Use of Old Notes

On 8th November, it was announced that old Rs 500 and Rs 1000 notes could be used at Government Hospitals, airports, Railways and Fuel Stations until 15 November.

Metro stations, toll plazas, ASI monuments, and medicine shops were added to the exemption list on 9th November.

Tuition fees, taxes and penalties payable to municipal and local bodies, utility charges like water and electricity were added on 10th December.

On 14 November, Government extended the use of Rs 500 and Rs 1000 notes to 24 November.

There is nothing wrong with the changed policies related to use of old notes but citizens still face several problems. Fuel pumps and medicine shops refused to give the balance amount and forced people to spend the whole amount whether it was Rs 500 note or Rs 1000 note.

All these changes were implementing during the Demonetization drive which forces us to think:

Are Indian policy makers not capable enough to plan all these rules before implementing a decision like Demonetization?
Whether Demonetization was a planned strategy or due to some unforeseen circumstances, RBI was forced into an abrupt decision?

If yes, then what are those reason?

While announcing demonetization of Rs 500 and Rs 1000 notes, PM Narendra Modi clearly said that middle class has nothing to worry about and their hard earn money is not going anywhere.

However, this ‘hard earn money’ has gone into a bank account and we are being deprived of what belong to us.

The government wants us to use plastic or electronic money but in a country where more than 40% population has no access to the internet, how do they expect us to move towards a cashless economy?

The government requested us to suffer for 50 days for the better good but all these changes in policies and rules have only resulted in a fear among Indian. People used to get excited after listing ‘Bhaiyo Behno’ and now all they think is, here comes another restriction.

Don’t you think that Demonetization is turning out a hurried decision that Indian Government should’ve have planned more?

Twitterati from all around the nation have said something about this decision turned joke and here are some of the most humorous Tweets:

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21 December 2016
Rohan Jaitly