The Reserve Bank of India (RBI) has withdrawn the December 19 rule that made it compulsory for people to explain the delay in depositing more than Rs 5,000 in old notes in their bank accounts. The provision will no longer apply to customers who have completed their KYC with their respective banks.
"Please refer to our circular (of December 19, 2016). On a review of the above, we advise that the provisions of the above circular at sub para (i) and (ii) will not apply to fully KYC compliant accounts," the RBI said on Wednesday.
The rule irked many who had relied on Prime Minister Narendra Modi's assurance given on November 8 that they can deposit their old notes (without any restriction or questions) when he made the announcement to demonetise Rs 500, Rs 1,000 notes.
The December 19 RBI rule was seen as a U-turn on the assurance by Modi, besides creating new avenues for bankers to harass people. The notification was seen as harsh on people because of the stipulations as recapitulated below:
Tenders of SBNs in excess of ₹ 5000 into a bank account will be received for credit only once during the remaining period till December 30, 2016. The credit in such cases shall be afforded only after questioning tenderer, on record, in the presence of at least two officials of the bank, as to why this could not be deposited earlier and receiving a satisfactory explanation. The explanation should be kept on record to facilitate an audit trail at a later stage. An appropriate flag also should be raised in CBS to that effect so that no more tenders are allowed.
- Tenders of specified bank notes (SBNs) up to ₹ 5000 in value received across the counter will allowed to be credited to bank accounts in the normal course until December 30, 2016. Even when tenders smaller than ₹ 5000 are made in an account and such tenders taken together on cumulative basis exceed ₹ 5000 they may be subject to the procedure to be followed in case of tenders above ₹ 5000, with no more tenders being allowed thereafter until December 30, 2016.
- It may also be ensured that full value of tenders of SBNs in excess of ₹ 5000 shall be credited to only KYC compliant accounts and if the accounts are not KYC compliant credits may be restricted up to ₹ 50,000 subject to the conditions governing the conduct of such accounts.
- The above restrictions shall not apply to tenders of SBNs for the purpose of deposits under the Taxation and Investment Regime for the Pradhan Mantri Garib Kalyan Yojana, 2016.
The letter had the potential to generate a huge backlash and impact the credibility of both the government and the RBI.