Flip-flop on cash deposit... another U turn - No cap, no questions will be asked till 30th December: RBI

TT, New Delhi, Dec. 21:The Narendra Modi government and the RBI executed another somersault today when they overturned an edict that KYC-compliant bank customers would not be allowed to deposit old notes valued at over Rs 5,000 more than once till December 30.

Bankers will no longer grill such customers if they make multiple trips to deposit the old notes, with no caps on the amount they can deposit.

The central bank issued another circular rescinding earlier instructions that those depositing amounts larger than Rs 5,000 would have to give a satisfactory response when asked why they chose to delay their deposit.

The latest U-turn prompted the Congress to call the RBI the "Reverse Bank of India". The flip-flop came after widespread criticism of Monday's circular that drove a spike through the promise of Prime Minister Modi and finance minister Arun Jaitley that citizens would have time till December 30 to deposit old notes and that no questions would be asked in the case of deposits of up to Rs 2.5 lakh.

Late on Monday night itself, Jaitley appeared to have set the stage for the flip-flop when he said in a televised media conference that no questions would be asked if the customer opted to make only one deposit of old notes of any amount.

Along with a public outcry and growing uneasiness among some allies of the government, a brewing backlash among bank officers also appear to have forced the government's hand.

The powerful All India Bank Officers' Confederation had threatened to stage a strike over the new rule that, it felt, was burdening bankers with a disagreeable policing job at a time when they were grappling with the task of managing queues and queries at their workplace.

Bankers today held demonstrations across the country against the RBI circular.

"Bankers (who) are under huge stress working hard for 12-15 hours (since demonetisation)... shall not carry out the duties of the Central Bureau of Investigation or the Enforcement Directorate at the busy counters of the bank," the officers' association said in a harshly-worded statement.

The bank officers' association said: "Customers are confronting bankers and seeking an explanation as to why the promise given by the PM and FM, that these notes can be deposited till December 30, is not being honoured."

They demanded that RBI explain to the public why it was unable to give regular and adequate supply of cash to state-run banks.

Several customers were agitated by Monday's circular as the rules seemed to imply that those who had opted to wait to deposit their pile of old currency in the hope that the queues would thin were involved in some kind of wrongdoing.

Many believe that the curbs were meant to spare the government blushes as more than 90 per cent of the demonetised notes are said to have flowed back into the system, destroying the raison d'etre for the entire exercise.

The RBI said today that banks have issued currency worth over Rs 5.92 lakh crore to the public since the demonetisation of old high value notes last month.

The central bank also said that it had issued 2.2 billion pieces of notes of new Rs 500 and Rs 2,000 during the period -- November 10 to December 19.

The currency infused into the system, however, is much less than what has been deposited in the form of the old notes. The old Rs 500 and Rs 1,000 notes returned to RBI and currency chests amounted to Rs 12.44 lakh crore as on December 10. Unofficial reports suggest that it has crossed Rs 14 lakh crore since that date.

The RBI said it had issued to the banks and their branches, for distribution to the public, a total of 22.6 billion pieces of notes of various denominations.

Of these, 20.4 billion pieces belonged to small denominations of Rs 10, Rs 20, Rs 50 and Rs 100, while 2.2 billion belonged to higher denominations of Rs 2,000 and Rs 500.