India raises cash withdrawal limits after banknotes ban

India has withdrawn 500- and 1,000-rupee notes from circulation, resulting in long queues of people depositing old bills across the country. Mr Modi defended the move as an important step to fight corruption.
India has withdrawn 500- and 1,000-rupee notes from circulation, resulting in long queues of people depositing old bills across the country. Mr Modi defended the move as an important step to fight corruption.PHOTO: REUTERS

MUMBAI • India raised the limits on withdrawals and exchange of old banknotes after the government's surprise move to ban high-denomination bills last Tuesday resulted in customers across the country queuing for hours to deposit the old bills.

The daily limit on withdrawals from cash dispensing machines has been raised to 2,500 rupees (S$52), while the weekly cap has been increased to 24,000 rupees.

Banks received three trillion rupees in deposits in the first four days of the ban taking effect, the Finance Ministry said in a statement late on Sunday. About 500 billion rupees have been disbursed either from withdrawals or the exchange of old banknotes, it added.

Prime Minister Narendra Modi on Sunday defended his move to withdraw 500-rupee and 1,000-rupee notes from circulation as an important step in the fight against corruption and tax evasion.

The government said it is stepping up efforts to ensure banknotes of all denominations are available, as banks, which remained opened across the country through the weekend, come under pressure to replenish the funds.

About 180 million transactions were handled by India's banking system in the four days through 5pm on Sunday, said the Finance Ministry.

The Reserve Bank of India has also urged the public not to be anxious and to avoid going to banks repeatedly to withdraw and hoard cash.

The government raised the withdrawal limit from a current account held at banks to 50,000 rupees per week to help small businesses pay wages, Economic Affairs Secretary Shaktikanta Das said in New Delhi yesterday. He added that the last day old high-denomination bills can be accepted at places such as government hospitals and utilities and petrol stations has been postponed to Nov 24.

Mr Modi is seeking to fulfil his election promise of recovering illegal income, locally known as black money.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 15, 2016, with the headline 'India raises cash withdrawal limits after banknotes ban'. Print Edition | Subscribe