 "People wait to deposit and withdraw their money outside banks and ATMs (Reuters)")
The Narendra Modi government has asked for time till late December to mid-January for the 'pain' of demonetisation to ease out. However, a major reason for the inconvenience -- withdrawal limits from banks and ATMs -- is likely to stay for longer.
After announcing his demonetisation drive on November 8, Modi has time and again asked for 50 days from the public. While no explicit instructions have been issued as to when the limits of Rs 24,000 per week for savings accounts and Rs 50,000 per week from current accounts, and Rs 2,500 per day from ATMs will be lifted, a large section of the public is hoping that these restrictions will be eased after December 30.
However, these limits will certainly not be lifted anytime soon. Even if the situation eases by mid-January, as per a statement by Finance Minister Arun Jaitley a couple of weeks back, the Finance Ministry and the Reserve Bank of India will take their time assessing the situation before lifting the caps, Business Standard has learnt from senior government sources.
As per the latest data available on RBI's website, since start of the demonetisation programme, banks have issued notes worth nearly Rs 6,00,000 crore till December 20 through ATMs and over-the-counter. That is just 39 per cent of the Rs 15.4 lakh crore in old 500- and 1,000-rupee notes that were demonetised in one swoop on November 8.
This is way below the Finance Ministry and RBI's comfort level at which they would want to remove withdrawal restrictions. "We do have a plan in mind on when to remove withdrawal restrictions. Any such decision will be deliberated upon and will be taken when the government and the central bank see that there is a fair amount of money disbursed back to the public," said a senior government official.
A top Finance Ministry official has said that the 'comfort level' would most probably be around 80 per cent, that is more than Rs 12 lakh crore remonetised.
The sense is that such removal would be gradual in nature rather than an outright lifting of caps. What is clear is that a complete lifting of withdrawal caps will most likely not be done before end-January or early-February.
Economic Affairs Secretary Shaktikanta Das has said that the Centre expects only 50 per cent of the demonetised amount to be remonetised by end-December.
Soumya Kanti Ghosh, chief economist at State Bank of India, had said in a report earlier this month that he expects re-monetisation at 75 per cent by end-January at the current rate of non-stop printing by the four mints.
Former government and RBI officials say that the state-owned Security Printing and Minting Corp's capacity could be around 10 billion banknotes per annum while RBI-owned Bharatiya Reserve Bank Note Mudran Private Ltd's capacity is around 16 billion banknotes. Most estimates put the monthly capacity of the four printing presses currently printing notes -- two of SPMC and two of BRBNMP -- at 3 billion notes per month.
At that rate, former finance minister P Chidambaram has surmised, it would take more than seven months to replace the nearly 23 billion notes demonetised. Of course that timeline will reduce if all notes are only of Rs 2,000, but that would create another cash crisis as change for such notes is not easily available.
Chidambaram's predictions may be too pessimistic in a way, but it has to be remembered that these are machines, which need constant looking after. One only hopes that the machines, which are running at full capacity, do not need downtime for repairs or maintenance while the re-monetisation process is ongoing.
