RBI relaxes cash withdrawal rule

People depositing money with banks in legal tender are allowed to withdraw the equivalent amount without any restriction

The Reserve Bank of India (RBI) has now said people depositing money with banks in legal tender (meaning, not in the now-banned Rs 500 and Rs 1,000 notes) on or after Tuesday are allowed to withdraw the equivalent amount without any restriction, preferably in high-value denomination.

It said it took this decision on careful consideration, as certain depositors were "hesitating to deposit their monies into bank accounts in view of the current limits on cash withdrawals from accounts".

This would mean, for instance, that business owners who deposit cash at the end of a day can now go to a bank and withdraw money as they did before demonetisation, to the extent they had deposited in existing legal tender. All business owners, small or big, handle huge cash on a daily basis and typically operate through current accounts on which banks don't offer any interest rate but put no restriction in withdrawal.

On November 14, the central bank had said banks should maintain a separate record for deposits done in old notes and the valid notes, customer-wise.