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Government Raises Cap On Bank Cash Withdrawal To Ease Public Anger
The Narendra Modi-led government increased the limit on cash withdrawals from bank accounts to calm public anger as millions of people clamoured for new rupee bills after a shock abolishment of large denomination notes
Photo Credit : Reuters
The Narendra Modi-led government increased the limit on cash withdrawals from bank accounts on Sunday (13 November) to calm public anger as millions of people clamoured for new rupee bills after a shock abolishment of large denomination notes.
Large crowds were again gathered at banks across the country trying to change Rs 500 and Rs 1,000 bills, demonetised by the government on Tuesday, in an effort to crack down on corruption.
Indian banks received Rs 3 lakh crore ($44.4 billion) of 500- and 1,000-rupee notes over the last four days, the Finance Ministry said in a statement, in a surge in liquidity in the banking system. Short term interest rates are expected to fall as a result.
The government relaxed cash withdrawal limits including removing a per-day cap of Rs 10,000, increasing the weekly limit to Rs 24,000 from 20,000 and allowed exchange of bills over the counter at banks to reach Rs 4,500 instead of 4,000.
The move to demonetise the large bills is designed to bring billions of dollars' worth of cash in unaccounted wealth into the mainstream economy, as well as dent the finances of Islamist militants who target India and are suspected of using fake Rs 500 notes to fund operations.
The banned rupee notes made up more than 80 per cent of the currency in circulation, leaving millions without cash and threatening to bring much of the cash-driven economy to a halt.
The Reserve Bank of India said small denomination currency notes were available with both the central bank and with other lenders.
People "need not be anxious" and should not hoard bank notes because "cash is available when they need it", the RBI said in a statement. It also asked banks to provide details of cash withdrawn and exchanged daily, in contrast to fortnightly, to provide a better idea on circulation.
The measures came as people complained of lack of access to their accounts despite hours of waiting at banks as well as over the non-functioning of tens of thousands of ATMs not yet reconfigured for the new series of smaller-sized Rs 2000 bills.
The Times of India reported that the central bank's office in the western city of Ahmedabad was handing out coins in return for the old notes because it didn't have enough valid tender.
It showed a picture of a man emerging with plastic packets of coins of 10 rupees, underlining the banking system's struggle to make the transition to the new series of notes.
Prime Minister Narendra Modi, facing criticism from opposition groups for putting ordinary people into difficulties, promised further steps to rid the country of graft.
"I know the forces up against me, they may not let me live, they may ruin me because their loot of 70 years is in trouble, but I am prepared," he said in a speech in Goa. The decision to demonetise the high value notes was planned in secrecy over the past 10 months, he said.
Modi came to power in 2014 with a mandate to boost economic growth and fight the corruption that taints large parts of India's political and business life.
So far, despite the rising difficulties people are facing, his crackdown on corruption is supported particularly among the middle-class which want action against the political and business elite for wrongdoing.
Anil Dalavi, a 32-year-old Mumbai resident with Rs 20 in his pocket who was waiting outside a bank, said he supported Modi's efforts to go after people with ill-gotten wealth.
"It has been tough for middle class people like us because we were caught completely unaware. But since this is a good move to flush out black money, I am willing to bear the pain."
The "black economy", the term widely used to describe transactions that take place outside formal channels, could account for as much as 20 per cent of gross domestic product, according to investment firm Ambit.
Modi's political opponents said they would unite to fight the demonetisation move which had made lives difficult for millions of ordinary people.
"The government has spread anarchy in the country, the common man cannot buy daily products," said Mulayam Singh Yadav, leader of Samajwadi party, as crowds formed outside banks in Lucknow, the capital of the country's most populous state Uttar Pradesh. Yadav demanded Modi withdraw the decision to cancel the bank notes.
Uttar Pradesh, which holds state elections early next year, sends the largest number of legislators to the Lok Sabha.