In a move that will bring relief to small traders and businessmen, the Reserve Bank of India (RBI) on Monday allowed them to withdrawal cash from current accounts of R1 lakh per week compared with just R50,000 earlier. The facility will be applicable to overdraft and cash credit accounts as well. The availability to withdraw more cash should help small businesses whose cash flows have been squeezed due to the shortage of cash.
The central bank also upped the limit on withdrawals from ATMs to R10,000 per day per card from R4,500 at present. The enhanced withdrawal limit, however, will be operative within the existing overall weekly limit of R24,000, the RBI said.
The central bank stated in a notification that the waiver of transaction charges for services availed at ATMs by savings account holders, which was notified on November 14, would continue.
On November 8, currency notes with denominations of R1,000 and R500 were declared to be not legal tender. The withdrawal of the large value of currency of R15.44 lakh crore hurt not just small companies and businesspeople but also households. The demonetisation process, which required those holding these old currency notes to deposit them in banks or exchange them, was aimed at weeding out black money. An estimated R14.9 lakh crore, however, is believed to have been deposited with banks since November 10.
At the end of November, the central bank had allowed withdrawals beyond the then applicable daily limit of R2,500 and weekly limit of R24,000 from bank accounts.
This was subject to the additional cash withdrawn being equivalent to deposits made in the new R500 and R2,000 notes by the account holder.
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Limits on cash withdrawal have been imposed and revised repeatedly by the central bank since the government announced its decision to withdraw legal tender on old R500 and R1,000 currency notes.
Digital transactions have grown significantly in the past two months as a result of the cash crunch resulting from demonetisation.
The aggregate value of transactions made at point-of-sale terminals in December stood at R52,223.84 crore, up from R51,121 crore in October, according to RBI data.
Transactions made through the Unified Payments Interface (UPI) rose to R712.03 crore in December from R90 crore in November, while those made through the Unstructured Supplementary Service Data (USSD) channel jumped to an aggregate of R10.37 crore in December from a little over R73 lakh in November.
The latest relaxation in the withdrawal limit for current accounts is expected to help ease the working capital woes of businesses that rely heavily on cash.
While the index of industrial production (IIP) rose to a 13-month high of 5.7% in November, experts said that the full impact of demonetisation will have played out only in December. “Going by the production trend in some sectors such as autos, next month’s (December) IIP growth data may be more indicative of the impact of demonetisation,” Crisil Research had written last week.