Rules on cash withdrawals for weddings may be eased2 min read . Updated: 22 Nov 2016, 08:45 PM IST
The government has got complaints from various quarters about the tough conditions for cash withdrawals for weddings
New Delhi: India may soon relax conditions for cash withdrawals for weddings, a top government official said on Tuesday, the day after the Reserve Bank of India (RBI) issued rules for such bank transactions widely criticised as unworkable.
Prime Minister Narendra Modi’s shock announcement on 8 November that he would scrap high-value currency notes, to curb untaxed “black cash" circulating in the economy, came in the middle of India’s cherished wedding season.
Families, rich and poor, go to huge lengths to celebrate weddings in India. A politician in Modi’s party drew massive criticism—and the attention of tax inspectors—after spending a reported Rs500 crore ($73 million) to stage his daughter’s wedding after the cash crackdown.
Under rules set by the Reserve Bank of India (RBI), cash withdrawals up to Rs250,000 ($3,700) are permitted only for payments to those holding weddings who have no bank account. The rules also mandate disclosing the names of all such recipients.
The money can be withdrawn only if the date of marriage is on or before 30 December, the deadline for relinquishing all old, high-value currency notes.
“We have got complaints from various quarters about these tough conditions," the finance ministry official told reporters, declining to be named as the proposal was still under discussion. “We could relax some of the conditions soon."
With just a small stock of smaller denomination notes available and people struggling to get hold of new Rs500 and Rs2,000 bills, consumers are holding back spending and businesses are suffering.
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Banks received Rs5.4 trillion ($79 billion) in deposits from 10-18 November, or nearly a third of the cash in circulation in India, while only around Rs1 trillion was withdrawn.
Finance minister Arun Jaitley expects extra deposits in banks to push down interest rates, ease the flow of credit and boost private investments. That would help growth to pick up after the initial disruption from the cash crackdown.
But analysts like Ambit Capital, a Mumbai-based equity research firm, say the cash crunch could result in GDP growth crashing to 3.5% in the current fiscal year ending March 2017, from 7.6% in the previous year.
Opposition parties led by Congress have stalled proceedings in parliament, demanding a reply from Modi and compensation for the families of dozens of people reported to have died while waiting in long queues outside bank branches to swap old money for new.
Modi’s government has tinkered with the so-called demonetisation drive to compel tax evaders and racketeers to come clean, and has launched an online survey to elicit public views on his decision. He plans a radio address on Sunday. Reuters