Limits on cash withdrawals from savings bank accounts have been enhanced to Rs 50,000 per week from the earlier Rs 24,000, the Reserve Bank of India (RBI) said in a notification. It added that from March 13, that there will be no limits on cash withdrawals from savings bank accounts.
On November 8, the government demonetized of Rs 500 and Rs 1000 notes which accounted for around 86% of the currency in circulation. The RBI has been slowly remonetizing the economy to current levels.
Last month, withdrawal limits on current accounts, cash credit accounts, and overdraft accounts were been removed completely. The RBI also said that cash withdrawals limits from ATMs will be withdrawn from February 01, 2017. “However, banks may, at their discretion, have their own operating limits as was the case before November 8, 2016,” it added.
Note that the earlier withdrawal limits on Jan Dhan Yojana accounts placed in November are still in effect. In view of a large number of reports of money laundering through Jan Dhan Yojana bank accounts, the RBI limited cash withdrawals. Fully KYC compliant Jan Dhan account holders will be allowed to withdraw Rs 10,000 in a month while limited or non-KYC compliant account holders may be allowed to withdraw Rs 5,000 per month.
Private sector banks capping free cash withdrawals
However, it needs to be pointed out that leading private sector banks in the country have capped the number of free cash withdrawals at branches. HDFC Bank will be charging customers with a savings bank account Rs 150 (plus taxes) after four transactions at a branch from March 31, 2017. Meanwhile, at ICICI Bank, customers will have four free transactions and will be charged Rs 5 thereafter and will be subject to a minimum of Rs 150. Axis Bank customers will be allowed five free cash transactions or up to Rs 10 lakh, whichever is earlier, per month.
Disincentivizing use of cash
Banks said that the charges on withdrawals were being places to discourage customers from using cash to shift to digital modes of transactions in line with the government’s proposals. Last month, the committee of chief ministers on digital payments suggested the Central Board of Direct Taxes levy a banking cash transaction Tax (BCTT) on transactions of Rs 50,000 and above, to curb the use of cash. It also considered a cap on a maximum allowable limit of cash in all types of large ticket size transactions. There were also proposals which sought to bring down threshold required for quoting the PAN card to Rs 30,000 from the existing Rs 50,000.