Cash Deposit Rules Tightened Days Before Deadline

Mumbai: The Reserve Bank of India tightened cash deposit rules on Monday, just days before the demonetisation deadline, saying individuals can bank over Rs 5,000 ($73.83) of old notes only once until December 30 if they provide a satisfactory reason.

Under the ongoing demonetisation scheme announced by the government, the public were allowed to deposit up to a total of Rs 2,50,000 of old currency notes with banks till December 30. Customers with amounts above that level had to provide an identification number known as the permanent account number.

However, the RBI in a circular said that any deposit above Rs 5,000 would be subject to questioning by two bank officials and the explanation should be kept on-record in case of scrutiny at a later stage.

The timing and the low threshold of the cap raised questions about the intention behind such a move as Rs 12.44 lakh crore ($183.67 billion) which is more than 80 per cent of the abolished cash has already been deposited with banks.

"Possibly the reason is to prevent any large scale money laundering towards the end of the scheme," said Soumya Kanti Ghosh, chief economist at the State Bank of India.

It could also mean that the Reserve Bank of India is unlikely to extend the deadline beyond the end of the month, analysts said.

($1 = Rs 67.7250)