The Reserve Bank of India has allowed account holders having KYC-enabled accounts to deposit more than 5,000 rupees in old notes without two bankers approving the deposit in a bid to partly ease its earlier ill-thought move.
The central bank had previously mandated that deposits above 5,000 rupees in saving bank accounts needed to be vetted by two bankers and the account holder was required to submit a written declaration as to why the deposit was held back for so long. Should the bankers not be satisfied with the reason, the account holder had no option but to let go of his deposit. What's more account holders had just one chance to deposit their remaining cash in junked 1,000-rupee and 500 rupee notes between Monday and December 30th. The previous circular also stated the deposit would leave an audit trail because of the written documentation and the bankers' approval being on record.
The RBI's regressive rule was widely opposed in the media, by political parties and from those against Prime Minister Narendra Modi's demonetization drive to unearth black money. The government had given time till December 30th to citizens to deposit their cash into banks. Thousands held back deposits due to serpentine queues and heavy rush in banks across the country as millions stood in lines to change old cash into new notes.
The RBI's law was impractical because hundreds of bank branches in rural India have just one bank official. Also, bankers were hesitant in giving approvals to depositors in case investigating agencies found the explanation unsatisfactory.