New Delhi: The Reserve Bank of India (RBI) on Monday let go of the last indicator of the two months of demonetisation. The central bank has officially removed all the limits on cash withdrawal from customer bank accounts that were first put in place on 8 November, after Prime Minister Narendra Modi said that Rs500 and Rs1,000 would stop being legal tender, in an address to the nation.
While the RBI removed the limits on withdrawals from automated teller machines (ATMs) on 1 February, it was still within the overall limit of Rs24,000 a week from savings bank accounts. In case of current accounts, the weekly withdrawal limit was earlier set at Rs50,000.
The 50-day demonetisation period for residents to deposit their old currency notes ended on 30 December. However, the central bank is yet to declare the total number of notes that were removed from the system and how many new notes were pumped in. According to initial estimates, about 86% of the value of total cash in circulation had to be removed after the demonetisation announcement. Representatives from the RBI and the government have repeatedly stated that there is no shortage of currency notes in India.
Immediately after the PM’s announcements in November, lines had begun forming outside ATMs and bank branches, with customers seeking to access as much of their cash as possible. This only led to chaos at banks, as branches themselves were running short of new currency notes in the first few weeks. ATMs across the country too were running dry as their ability to hold cash and the cash logistics company’s ability to refill them is limited.
Moreover, some large banks, who also control currency chests in India, were hoarding new currency notes to serve customers who were visiting their branches, leading to an acute shortage of available currency notes.
The situation has improved considerably over the last few weeks, with remonetisation efforts gaining steam.
Demonetisation which was initially aimed at countering black money hoarders and counterfeiters in India was later touted to be the big push to digital payments for the country. For a short period of time, digital payments applications and technologies such as the debit and credit card transactions at point of sale (PoS) terminals, national electronic funds transfer (NEFT) and mobile banking applications saw a spike. However, as currency notes find their way back into the pockets of the population at large, this has now changed.
Debit and credit cards reported over 311 million transactions at PoS terminals, with money worth Rs522 billion being transacted in December. These numbers dropped to 265.5 million transactions worth Rs481 billion in January and 212 million transactions worth Rs391.5 billion in February. In October, India spent performed 229.45 million transactions at PoS terminals using their debit and credit cards, with money worth Rs518.83 billion being transacted, RBI’s monthly bulletin shows.