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India's federal bank just can't make up its mind on demonetization

Reserve Bank of India or Reverse Bank of India?

Sohini Mitter

on December 22, 2016

Original image has been replaced. Credit: Mashable

The Reserve Bank of India (RBI), India’s federal bank, has now been touted as the ‘Reverse Bank of India’ or even the ‘Rollback Bank of India’, following its most recent U-turn that has to do with the deposit of scrapped currency notes.

Three days ago, the RBI had issued its 59th circular since demonetization, restricting people from depositing over Rs 5,000 ($73.7) in old banknotes more than once till Dec. 30.

One of the clauses had also said that any deposit exceeding that amount would be put through questioning by two bank officials, who have to be given a “satisfactory explanation” for why the old notes were not deposited earlier.

After severe backlash from citizens across societal strata, the RBI reversed its decision and declared that all KYC-compliant accounts are exempted from the Rs. 5,000 cap. This came after Indians, including leading politicians, resented against RBI’s move. Everyone claimed that they had gone by the government’s assurance of “time till Dec. 30”. Citizens took to social media to express their displeasure.

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But RBI’s changing guidelines should hardly come as a surprise now. Since Prime Minister Narendra Modi announced demonetization on the evening of Nov. 8, the RBI has “changed norms 126 times” as claimed by the Congress, India’s leading opposition party. Vice-president Rahul Gandhi even sent out a tweet mocking both the central bank and the Centre.

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The RBI’s repeated U-turns have drawn the ire and sarcasm of Indian people.

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Here’s a timeline of the major amendments made by the country’s premier banking institution since the note ban became effective.

Nov. 8: Rs 500 ($7.36) and Rs 1,000 ($14.72) notes are scrapped. These notes could be exchanged for Rs 4,000 ($59) at bank branches. New Rs 2,000 ($29.45) notes to be issued.

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Nov. 10: Withdrawal limit set at Rs 10,000 ($147.29) per day and Rs 20,000 ($294.58) per week.

Nov. 11: RBI assures you that you have enough time to exchange your old notes. It also calls for calm at banks.

Nov. 13: Exchange limit raised to Rs 4,500 ($66.27) per day. Daily ATM withdrawal limit increased to Rs 2,500 ($36.82) per day. Withdrawal limit from branches increased to Rs 24,000 ($353.8) a week; daily limit removed.

Nov. 14: District Central Cooperative bank customers can withdraw Rs 24,000 per week, but cannot exchange old notes for new ones, or deposit old notes. Current account holders can withdraw Rs 50,000 ($736.37) per week.

Nov. 17: Exchange limit changed for the third time, reduced to Rs 2,000 per day.

Nov. 18: Cash withdrawal through point-of-sale systems made uniform at Rs 2,000 per day per account.

Nov. 23: Scrapped notes would not be accepted as deposits in small savings accounts.

Nov. 24: Exchange norms changed for the fourth time, RBI scraps the facility altogether at bank branches. Citizens can no longer exchange old notes, can only deposit the amount to their bank accounts.

Nov. 25: Foreign citizens allowed exchanging their currency notes up to a limit of Rs 5,000 per week till Dec. 15.

Nov. 28: Withdrawals beyond the stipulated limit would be allowed if one deposited legal currency.

Dec. 19: Deposits above Rs. 5,000 will be allowed only once. Any more would be subjected to official scrutiny.

Dec 21: Rollback of Dec. 19 order, fully KYC-compliant bank accounts exempted from the Rs 5,000 cap.

Somewhere between Nov. 28 and Dec. 19, the RBI had issued an order claiming that some unscrupulous elements were creating confusion regarding announcements and circulars. It had cautioned banks and people to trust only official communication.

Quite an irony, then, that at this moment there’s nothing more confusing perhaps than RBI’s official communication.