Govt to raise withdrawal limit after banks get 80% new notes

New Delhi: The government will start easing restrictions on cash withdrawals once 80 per cent of the new currency introduced following the demonetisation is re- channelised through bank deposits, a top official said today.

Queues at banks have reduced substantially and are visibly longer only in poll bound states like Uttar Pradesh and Punjab, he said. The official added that the restrictions on cash withdrawals will be first eased in case of cooperative banks and then for all the scheduled commercial banks.

Prime Minister Narendra Modi had on November 8 announced junking of old Rs 500 and Rs 1,000 notes, and replaced by new Rs 2,000 and Rs 500 notes.

Along with demonetisation, restrictions were placed on bank counter as well as ATM withdrawals. The withdrawal limit from banks is Rs 24,000 a week, including a maximum of Rs 2,500 from ATMs per day.

The official said the government is re-monetising the scrapped currency, which made up for 86 per cent of bank notes in circulation by value.

"We could not print all the currencies in one go because we wanted the money to be channelised in the system first," he said.

As of now, 50 per cent of the deposits in banks are in the new currency which shows gradually money is remonetised, he said implying that half of the new currency withdrawn has found way back into banks by way of deposits.

"When 80 per cent of new currency is re-channelised in the bank deposits then withdrawal restrictions will be eased," he said.

"Withdrawal restrictions will first be relaxed for cooperative banks and then for all banks. And over time as remonetisation is completed they will be removed totally."

Before the announcement of demonetisation, the government had already arranged for the printing of 200 crore Rs 2,000 notes, or roughly about Rs 4 lakh crore in value. They were the first set of notes to be circulated.

Thereafter, a new Rs 500 note was introduced and now all the four printing presses of RBI at Dewas in Madhya Pradesh, Nashik in Maharashtra, Salboni in West Bengal and Mysuru in Karnataka are working overtime to replenish the exhausted currencies. The official said the restrictions will be withdrawn once the situation stabilises.

"Remonetisation has substantially happened and as and when it (stabilisation) happens, restrictions will be eased," he said, adding that there will be no cap on deposits made in the bank from January 2017.