As Prime Minister Narendra Modi gets ready to address the nation after almost 50 days into demonetization on December 30, a reliable source told DNA that the government was seriously considering relaxing current restrictions on withdrawals from banks and ATMs from Rs 2,500 per day and Rs 24,000 per week to Rs 4,000 per day and Rs 40,000 per week respectively.
Modi had sought 50 days to normalise the liquidity situation after he made Rs 500 and Rs 1,000 notes illegal from November 8 midnight.
A source in the government, who spoke on condition of anonymity, said since the shortage of cash continued to persist, the restriction on withdrawal may not be completely removed but would be eased.
“Today, for instance, the restriction is Rs 24,000 per week and Rs 2,500 per day; they might increase that to Rs 4,000 per day and Rs 40,000 per week, but nevertheless, will continue with the restrictions. All of this is expected to be announced by the PM on December 30 evening. He is planning an address (to the nation) at 8 pm in which he is going to connect what he said on November 8 and ask countrymen to be patient,” he said.
Also, the government is contemplating an ordinance to restrict holding of banned notes and penalising their possession of beyond a certain limit after December 30. However, the ordinance is likely to be issued only after the liquidity situation improves. “That (ordinance) is being discussed very seriously, but there are two specific challenges. One is that in terms of the RBI (Reserve Bank of India) notification issued on November 8 that even after January 1 people have time till March 31 to deposit with RBI. Technically the ordinance can’t be issued with effect from January 1 because if they say that holding the currency is illegal after January 1, then those who would have planned to deposit it with the RBI (after December 30) will not have that window (given by the government earlier),” said a source.
The second issue was shortage of liquidity in the economy; “even today, the country is largely running on Rs 2,000 note. Other denomination notes have not yet been made available and the process of contracting for new currency notes has just started. The problem is not going to vanish from first week of January,” he said.
According to the source, tenders for printing of new currency notes of Rs 500 and Rs 2,000 were issued from December 22. “The government can’t just call anybody and ask them to do it. They have to buy the paper, the ink, open tender, and then do it,” he said.
Also, the government does not want to take any unpopular decision. “With the after-effects of demonetization still lingering, it does not want to become more unpopular—saying on one hand that holding old money is illegal and you can be penalised, while on the other it still cannot meet the currency demand,” he said.