The Reserve Bank of India (RBI) on Wednesday retracted a directive for banks to question individuals depositing more than 5000 rupees ($74) in discontinued currency, just two days after issuing the order.
The central bank asked lenders to seek reasons why the funds were not deposited earlier in the government’s crime-busting demonetisation campaign, which began on Nov. 8 with the abolition of 500 and 1000 rupee notes – 86 percent of all cash.
The directive was widely criticised as diluting a government assurance that banks would accept the notes until the end of December.
It was withdrawn in a one-line notification for accounts verified with so-called know-your-customer documents. The central bank did not provide a reason for the withdrawal.
“The government told us to withdraw the circular,” said an RBI official with direct knowledge of the matter. The withdrawal was with immediate effect, said the official, who was not authorised to speak with media and so declined to be identified.
Other measures under demonetisation include stopping over-the-counter exchange of the discontinued notes at banks and reversing an assurance that daily cash withdrawal limits from automated teller machines would be increased.
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