- Wealth PMS
RBI has removed withdrawal limits on current accounts and overdrafts, and all ATM limits it had placed. Notification:
- Limits placed vide the circulars cited above on cash withdrawals from Current accounts/ Cash credit accounts/ Overdraft accounts stand withdrawn with immediate effect.
- The limits on Savings Bank accounts will continue for the present and are under consideration for withdrawal in the near future.
- Limits vide the circulars cited above placed on cash withdrawals from ATMs stand withdrawn from February 01, 2017. However, banks may, at their discretion, have their own operating limits as was the case before November 8, 2016, subject to 2 (ii) above.
This is a good thing.
What it means is:
- If you have a current account, or your company does, you can withdraw however much you want as cash. This applies to overdraft accounts too. Applies from today.
- You can draw from ATMs without the Rs. 4,500 per day limit, from ANY kind of account. However your ATM card will probably have Rs. 10,000 to Rs. 20,000 per day limit anyways (even from before demonetization). Applies from Wednesday, Feb 01.
- For savings bank accounts, the maximum you can draw is Rs. 24,000 per week. Even if your ATM limits are opened, you are limited to Rs. 24,000 per week.
A Relief, at last, if Banks have cash
With oncoming elections, the need for cash must have been rising. Additionally, companies see the need to draw and deposit cash as their customers need it.
This will be a welcome relief for them.
However we expect ATMs to continue to run out of cash at a higher pace than pre-demonetization. This is largely because the return to cash – even if not a 100% return – has been stifled by restrictions on amounts per day.
The system Has Rs. 9.8 trillion rupees of currency in circulation now, and the RBI seems to be printing furiously.
Is this enough? The RBI is seeing an increasing amount of cash being moved back, which means people are withdrawing in reasonably large numbers. We’ll have to see how much things change after the limits are eased completely.
The incentives for cash based transactions still remain. Apart from being simple, easy and fast, cash is also very reliable unlike our current banking networks. However, there is the added factor of “will not pay tax on it” for merchants who may not declare such transactions at all, and thus create more black money.
We should hope that some transactions have moved from cash to electronic mode, forever. But if it’s only a stop-gap arrangement, then it’s debatable what good has really come out of all this.
We also don’t understand why the RBI would still stifle savings bank accounts. Our guess is that we’ll know soon in the budget, or with a subsequent clarification from the RBI. Looking at the data, we should have all limits removed by the end of March.