RBI might lift cash withdrawal restrictions soon

The cash withdrawal restrictions, as expected by the banks, will ease from mid-February, especially when it comes to people engaged in business. There are also some people who believe that Reserve Bank of India may be advised by the government to lift the restrictions completely before the assembly elections in five states including Uttar Pradesh and Punjab conclude in mid-March.

According to some market experts, a tax could be levied on withdrawals beyond a limit to deter large withdrawals that could generate future black money. In order to deal with it, Pune based think-tank Arthakranti Pratishthan suggested a 2% banking transaction tax to replace most other existing taxes.

Also a committee of state chief ministers on digital payments recommended a tax to discourage cash transactions and a cap on the maximum allowable limit for large-size cash transactions.

"We expect RBI to review the decision in February and take a decision. By February, the cash withdrawal limits will be significantly eased. The cash crunch in both urban and rural centres has eased quite a bit. Statistics sug gest that net currency with the public is at a comfortable position," Rajnish Kumar, managing director at State Bank of India, told ET.

Recently, RBI relaxed the cash withdrawals restrictions on January 17 and allowed customers to withdraw Rs 10,000 from ATMs in a day compared with the earlier up to Rs 4,500 daily limit. The weekly withdrawal limit remains at Rs 24,000. For current accounts used mainly by business people, the limit was raised to Rs 1 lakh from Rs 50,000.

"The current account limit needs to be raised more than anything else. Businessmen continued to struggle with such withdrawal curbs," a senior branch manager with Union Bank of India told ET.