No Cash Withdrawal Limits From March 13
Withdrawal limit to be enhanced to Rs 50,000 a week from February 20
The Reserve Bank of India (RBI) on Wednesday said the weekly limit on withdrawal of cash from savings bank accounts will be lifted in two stages. By mid-March, all limits will be removed, signalling an end to the remonetisation process.
In the first stage, the limit for withdrawals will be increased to Rs 50,000, from the current Rs 24,000, from February 20. Starting March 13, all limits would be done away with.
"In line with the pace of remonetisation, it has been decided that the limits will be removed in two stages", RBI Deputy Governor R Gandhi said at the press conference after the bi-monthly monetary policy review.
The RBI had removed restrictions on cash withdrawals from current accounts, cash credit accounts and ATMs starting February 1. However, the weekly withdrawal limit of Rs 24,000 on savings bank accounts was kept unchanged.
Demonetisation Process Comes To A Close
On November 8, the government decided to withdraw 86 percent of all currency in circulation by scrapping notes of Rs 500 and Rs 1000. The value of currency withdrawal was Rs 15.45 lakh crore. At the time, the RBI had printed only Rs 4.9 lakh crore in new Rs 2000 notes, it said in response to a Right To Information (RTI) query.
The severe shortage of currency meant that the RBI has to impose strict restrictions on withdrawals, which have been lifted in stages as more new currency has come into the system.
On Wednesday, RBI deputy governor said that Rs 9.92 lakh crore in currency was in the system. This matches with the currency in circulation data put out by the RBI as of January 27. Currency as a percentage of GDP has also been normalizing, said Nomura Global Research in a report on January 27.
From a peak of 11.8 percent of GDP on 4 November 2016 (pre-demonetisation), currency in circulation dropped to an all-time low of 5.9 percent on 6 January. Since then, it has risen for two straight weeks to 6.5 percent of GDP as of 20 January.Nomura Global Research
Unanswered Questions Remain
Even as the currency position is improving, a number of unanswered questions remain. Most importantly, the RBI is yet to release data on how much old currency came back to the banking sector. That statistic may be important in understanding whether the central government could see a fiscal windfall when the unreturned currency is extinguished.
When asked about the amount of old currency deposited, RBI deputy governor SS Mundra said the process of compiling that data is still underway. He said that the RBI has more than 4000 currency chests and the notes received across all these locations have to be tallied before the data is released. The RBI also said it needs to account for deposits taken by cooperative banks and currency that may be lying in neighboring nations like Nepal.
While the RBI is yet to release data, a back of the envelope calculation based on data available showed that less than Rs 70,000 crore has been left behind.