The Reserve Bank of India moved to ease cash withdrawals from savings banks accounts over two stages as a part of its monetary policy statement on Wednesday.
The RBI, under fire from its less than satisfactory handling of the demonetization process, said savings account holders will be able to withdraw up to Rupees 50,000 per week from February 20th compared to Rupees 24,000 now. These limits will be completely removed from March 13, a panel of RBI officials told reporters in Mumbai. The announcement brings down the curtains on the government's moves to restrain savers from withdrawing new currency from bank accounts as a part of its wider drive to curtail cash transactions and promote digital commerce.
Earlier, India's Central bank kept key policy rates unchanged to 6.25 per cent and shifted its policy stance to `neutral' from `accommodative' in bid to control inflationary expectations in a slowing economy.
Governor Urjit Patel said in a statement “inflation is edging up on the back of rising energy prices and a mild firming up of demand…. the committee decided to change the stance from accommodative to neutral while keeping the policy rate on hold to assess how the transitory effects of demonetization on inflation and output gap play out.''
Meanwhile, the benchmark Nifty dropped 18 points to 8,749 points soon after the announcement as traders surmised that expectations of a further cut in interest rates will not be fulfilled.
The Nifty surged 6 per cent in the past month on a combination of pre-budget expectations, a fiscally prudent annual budget for the year to March 2018 and sustained buying into beaten down blue chips post demonetization.
Indian banks are flush with cash deposited by citizens after the government's shock move to remove the legal tender status of the 1,000-rupee and 500-rupee notes on November 8. Prime Minister Narendra Modi's move to curtail the flow of illegitimate cash in the economy resulted in banks getting more than $320 billion in deposits.