Jaitley at the news conference in New Delhi. Picture by Prem Singh
TT, Nov. 12: Union finance minister Arun Jaitley was unable to come up with an unequivocal reply to a question: can bank customers collect Rs 4,000 in cash in exchange for their old notes just once or multiple times?
The question was popped at a media conference in Delhi after finance ministry mandarins had a teleconference with RBI officials to review the situation that has enveloped a besieged banking system.
A reporter asked the question that has been troubling bank customers across the country: " Kya ek hi baar mauka milega Rs 4,000 exchange karne ka ya phir rozana Rs 4,000 exchange kar sakte hai (can we exchange Rs 4,000 just once or every day)?"
Jaitley conferred with economic affairs secretary Shaktikanta Das before replying: " Main itna kahunga aisa koi nirnay nahin hai. Lekin behtar hai ki jin logon ke paas cash hai, woh deposit karke usko withdraw karein. Usme queue bhi chhota hai aur saralta bhi zyada rahegi unke liye (I will only say that we haven't taken any decision on this. But it would be better if people with cash first deposited the sum in their accounts and then withdrew it. The queues will be shorter and it will also make things easier for them)."
He added: "Banks are being forced to entertain a massive number of clients now. So, because of this, they don't want the same person to come again and again. So, they may be administratively saying so."
But that is not what the RBI is saying. Nor is this reflected in anecdotal evidence from customer experience at bank branches.
RBI sources indicated that the exchange option of Rs 4,000 per person can be exercised only once. They, however, hastened to add that after exhausting the exchange option, individuals with more demonetised notes in their homes can deposit them at the bank and there is no limit on these deposits.
Thereafter, people can withdraw cash from the banks against a withdrawal slip or cheque, subject to a ceiling of Rs 10,000 in a day within an overall limit of Rs 20,000 in a week (including withdrawals from ATMs) up to November 24. This limit will be reviewed after that date.
"This exchange limit of Rs 4,000 has been set to meet emergency needs of people. Perhaps, there is a misconception that all the old bank notes of Rs 500 and Rs 1,000 that an individual has can be exchanged and that it can be done multiple times. This is not correct and it is perhaps one of the reasons why there are serpentine queues at banks," the source added.
The RBI, however, hasn't put out a circular on how to deal with the exchange of discontinued notes, giving banks a lot of latitude in interpreting the rule.
One private sector banker said the facility to exchange notes worth Rs 4,000 could be exercised only once till November 24, after which it could be reviewed.
A senior State Bank of India official in Calcutta said his branch had received a circular from the head office, asking the bank to restrict the currency exchange to Rs 4,000 per person per ID (identity document) till November 24.
The cash management section of Canara Bank's head office in Bangalore told its branches on November 10 through a circular: "It is hereby explicitly clarified that the limit of Rs 4,000 per individual for exchange of SBN (specified bank notes) is for the entire period i.e. 15 days or till the limit is reviewed by the Reserve Bank of India."
Software alert
An SBI official said software had been put in place to alert the bank whenever there was multiple use of the same ID. However, the software may not be able to detect the use of different IDs by the same person. To run a check on the software, the official had himself used two separate IDs and no alert popped up in the system.
"All monetary exchanges by a person in every bank are being tracked almost on a real-time basis with a new software," said an HDFC official, adding that although an individual can unofficially use different ID cards to exchange cash multiple times, manual vigilance across all HDFC branches was on.
Axis Bank officials said they had put checks and balances in place, including a back-end system that could detect whether a person had exchanged money multiple times. "We have to prevent circumstances where someone may try to gain from the system," said an Axis Bank official.
A Canara Bank official was taken aback while executing an exchange request from a customer.
"A message popped up on my screen saying this person has already exchanged currency at an SBI branch. When I asked him, he admitted that a transaction had taken place a day before. Our system disallowed the exchange as a result," she said. Sources said the bank had earlier this month implemented new software that tracks down customer interaction with the bank.
It couldn't be established whether the software - which appears to have been installed at various banks - had been introduced to stop people from gaming the system after Prime Minister Narendra Modi's shock announcement on November 8.
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