No withdrawal limit from March 13, key rates unchanged: RBI
Come March 13, and you will be able to withdraw as much as you want even from your savings bank account. The limits on savings bank cash withdrawals post-demonetisation are to be withdrawn in two stages, the Reserve Bank of India announced on Wednesday, with the limit slated to go up to Rs,50,000 per account from February 20 and to cease from March 13.
On January 30, the RBI had ended all curbs on withdrawals from Current Accounts, Cash Credit Accounts and Overdraft Accounts.
The limits were placed following the November 8 demonetisation of Rs 1,000 and Rs 500 notes. The upper limit at ATMs was just Rs 2,500 initially and was later raised to Rs 4,500.
In January, the RBI had hiked the daily ATM withdrawal limit to Rs 10,000 and doubled the weekly Current Account withdrawal limit to Rs 1 lakh. The upper limit for weekly withdrawal from bank accounts had been raised to Rs 24,000 from Rs 20,000 in November.
While lifting of ATM withdrawal limits from March 13 will represent coming full circle for these machines in respect of demonetisation, it is to be seen whether the amount of cash supplied by RBI will be able to satisfy the demand of citizens in future.
RBI, however, left interest rates unchanged for second time in a row awaiting more clarity on inflation trend and impact of demonetisation on growth even as it hinted at no interest-rate cut in immediate future by shunning its long-held "accommodative" monetary policy stance.
It lowered economic growth forecast to 6.9 per cent for the current fiscal from 7.1 per cent estimated earlier, but said the economy will bounce back to 7.4 per cent next fiscal.
The broad-based Monetary Policy Committee "decided to change the stance from 'accommodative' to 'neutral' while keeping the policy rate on hold to assess how the transitory effects of demonetisation on inflation and the output gap play out," Reserve Bank Governor Urjit Patel said.
The six-member panel voted 6-0 to keep the repo rate unchanged at 6.25 per cent, marking its third straight unanimous decision since September when it was formed. It had cut interest rate by 0.25 per cent in its maiden meeting but held on to the rates in December and again today despite fervent calls for a reduction in rates to boost lending. At 6.25 per cent, the repo rate is already at a six-year low. Prior to that, RBI had cut interest rates by 150 basis point or 1.5 percentage points since January 2015.
RBI projected retail inflation in the range of 4 to 4.5 per cent in the first half of 2017-18 fiscal and between 4.5 per cent to 5 per cent in the second half.
The Central Bank said it is "committed to bringing headline inflation closer to 4.0 per cent on a durable basis and in a calibrated manner" and this requires further "significant decline in inflation expectations, especially since the services component of inflation that is sensitive to wage movements has been sticky.
Patel said non-food part of the consumer price index (CPI) has been sticky at 4.8 to 4.9 per cent and had it not been for a destruction of vegetables and other perishables due to junking of old 500 and 1000 rupee notes, retail inflation would have been 140 basis points higher than the 3.4 per cent seen in December.
RBI also decided to form a separate enforcement department for stricter enforcement of its regulatory and supervisory actions.
Nudging banks for better transmission of previous reduction in policy rates, Patel said there is still scope for cutting lending rates.
However, the RBI said that MPC believes the environment for timely transmission of policy rates to banks lending rates will be considerably improved if the banking sector's non-performing assets (NPAs) are resolved more quickly and efficiently and recapitalisation of the banking sector is hastened.
Also, the formula for adjustments in interest rates on small savings schemes to changes in yields on government securities of corresponding maturity is fully implemented for transmission of policy rates.
The next meeting of the MPC is scheduled on April 5 and 6, 2017.