Further, many ATMs still offer only the Rs 2,000 notes, which is hard to exchange. The point here is unless the supply of lower denomination notes substantially increases and majority of the ATMs turn operational, higher withdrawal limits would hardly help.
Secondly, announcing the relaxation on Monday, the RBI also said “There are no changes in the other conditions. The relaxations as provided in our circular dated November 28, 2016 will continue”. Here is where the next problem lies.
This means that the weekly withdrawal limit of Rs 24,000 stays. Hence, doubling the daily withdrawal limit do not mean much if you want to draw more cash. A person, who used to withdraw Rs 9,000 in two days per card earlier can do so in a single day now. But, he or she can’t withdraw more than Rs 24,000 a week. In reality, an average citizen doesn’t require this much cash, but the fear-driven tendency to withdraw more will come into play.
Third, the RBI notification is completely silent on the current cash situation and the future roadmap for lifting the cash withdrawal restrictions. It would have helped if the RBI could offer a solid roadmap on how it intends to lift the restrictions gradually. This wouldn’t be an impossible task given that the RBI should know (it is the guardian of currency) how much currency is printed in the four government mints and how long should it take to replenish the system with adequate cash. A firm guidance on future situation would have helped.
For these three reasons, the common man’s tendency to draw maximum permissible cash (even if he doesn’t need that much) and keep it at home anticipating future shortage would remain. When the cash doesn’t return into circulation, the shortage will persist. The psychological fear of continuing cash withdrawal limits would do more harm to the system. The RBI could have easily addressed this aspect by giving a guidance on till when the cash shortage will persist and what is the status of printing new currency. If RBI comes forward and be transparent on the cash situation, it can cure the panic among public to a great extent.
