Loopholes, confusion over Rs 4,500 exchange limit

Though people without bank accounts are under the impression that they can exchange Rs 4,500 daily from different bank branches but, according to RBI instructions, they are only allowed to withdraw this money once in the next 50 days. Many people are not aware of this restriction until they are turned away from the bank when they try to exchange money for the second time. The people trying to exchange cash constitute the majority of our population and also the largest number of people queuing in front of the banks right now. 

Though banks are trying to keep tabs on the ID of customers exchanging cash by crosschecking their ID proof details and names of all cash applicants in their database, it is a near impossible task as one person may have three or four ID proofs which he may present to the bank on different days. In addition, he may go to different banks and do the same once his quota of ID cards has been exhausted at one bank. 

Though banks are desperately trying to come up with a way to crosscheck the exchanges at different branches they have thrown up their hands and said their duty is to send all the ID proof data provided by customers to the RBI and it is their duty to pursue anyone who has misused the system. RBI has not been very clear in its instructions to bankers, as neither it nor the bank officials have the resources to cross check if all the ID proofs belong to the same person and whether or not the ID proofs are real or fake. 

RBI is also aware that if it comes down too hard on all those exchanging cash too strictly, by employing some form of biometric identification, it still may not be able to pursue or prosecute these people later as many don’t reside at the addresses listed on their ID proofs. Also repeatedly turning away those who want to exchange all their cash might lead to carnage on the streets and violence against bank officials. 

With the chaos at banks already threatening to veer out of control, RBI and bank officials are also wary of further stoking public anger by insisting that each person can only get 4,500 rupees to spend a month. In Delhi, this is simply not enough to meet monthly expenses after paying the rent and electricity bill. With daily labourers earning around Rs 10,000 this may lead to open revolt, as most people get paid weekly or around the 10th of each month by contractors, so no way will they be able to exchange the entire amount of Rs 20,000 for November and December within the stipulated time period, as the maximum they can get is Rs 4,500, unless RBI changes the rules midway. 

This means that only one-fifth of their salary can be exchanged, the rest has to be thrown away or later exchanged at RBI offices after long explanations and many proofs of income demanded, which they may not be able to provide. Not to mention the many thousands of rupees  more they have stashed away in their homes for an emergency, which can be anything from Rs 50,000 or one lakh, or if there is a marriage in the family or a plan to build a home in their village, it can go up to much more. 

The only way out for such people is to somehow open an account within the next 50 days and deposit all their cash, but this looks increasingly difficult due to the very hectic schedules of harassed bank officials and their innate reluctance to open bank accounts for those with insufficient funds and ID documents. This has already been witnessed in the last two years, where lakhs of Jan Dhan applicants were turned away by both Public and Private sector banks for not fulfilling the criteria for opening such accounts when the situation was much more normal than it is at present.

This is especially true in the rural sector and while many such people may have an Adhaar or Voter ID card, they do not have a pan card, needed to deposit any amount of 50,000 rupees or above.

Also, after the atmosphere of fear mongering and name calling by the Modi government, calling all tax evaders beimaan and criminals. Bankers too have started viewing anyone trying to open an account and depositing a large sum of money as backdoor money laundering effort by tax evaders.

These hapless people will not be helped by the fact that there are definitely some proxies waiting in line every day to deposit the black money given to them by hoarders at different bank branches as the proxies know it will be almost impossible to catch them or prove the money did not belong to them. They might be paid a good commission for their efforts and spend the next fifty days exchanging money at different banks after taking leave from their regular jobs. 

Narendra Modi has opened a Pandora’s box, and the problems that are being created had certainly not been envisioned by the Prime Minister, whose intentions are good but there seems little method in his madness. 

Did he envision that people would start to hoard 100 rupee notes or even 10 or twenty rupee notes would start going at a premium? Did he really want people to tear up, burn or throw away crores of rupees into rivers or rubbish dumps for fear of prosecution? Did he envision that many who have no accounts and are desperate to exchange their cash are also being paid several months salary in old notes in advance which they must also exchange in the next fifty days?

One hears that photocopying outlets are already refusing to photocopy ID cards as they do not have small change and their cartridges have run out of ink, as millions of people are photocopying all ID cards and bank forms in triplicate with this very intention of exchanging money multiple times at bank counters. 

No one knows what other strange phenomena will be thrown up by this sudden and perhaps hasty decision by the Narendra  Modi Government. One peculiar phenomenon is the disappearance of salt from shopping outlets that accept credit or debit cards. Perhaps credit card users may start hoarding many other essential items as they can spend freely in the fear that the price of these items may skyrocket or disappear from shelves. 

Many people might also start buying in bulk and selling such items at a profit to those who cannot buy in cash. When you set the cat among the pigeons, there may be many consequences one did not imagine in one’s wildest dreams. Whether most of them will be good or bad, the experts will only be able to calculate in the far future.