In a circular issued to banks on Wednesday, the RBI said it was revoking the restrictions after review. In a circular issued to banks on Wednesday, the RBI said it was revoking the restrictions after review.

In a sharp U-turn by the Reserve Bank of India, the restrictions imposed on bank deposits exceeding Rs 5000 in old notes have now been withdrawn by the central bank. In a circular issued to banks on Wednesday, the RBI said it was revoking the restrictions after reviewing the case. On Monday, the RBI announced that deposits in old notes will be limited to Rs 5000, and those exceeding the sum will come under scrutiny. “Tenders of specified bank notes (SBN) in excess of Rs. 5,000 into a bank account will be received for credit only once during the remaining period till December 30, 2016,” RBI said.

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It said that customers would have to answer questions such as why they couldn’t deposit the demonetised currency so far. Only after receiving a satisfactory reply would the bank credit the amount to the individual’s account, RBI said. It also added that deposits less than Rs 5000, but cumulatively exceeding the limit, will also be duly scrutinised. And the money deposited would be only credited to KYC complaint accounts, it said. RBI set December 30 as the deadline for making the deposits.

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Finance Minister Arun Jaitley, however, clarified that deposits made in one go would not attract questions from bank and tax authorities, but repeated deposits by same account holder might raise questions. This further compounded the confusion over the initial notification issued due to the contradicting statements coming from the government and RBI. The fresh directive by the RBI came under heavy criticism from the Opposition, with Congress vice-president Rahul Gandhi tweeting “RBI is changing rules like the PM changes his clothes”.

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Full text of the RBI circular issued today:

“Please refer to our . On a review of the above, we advise that the provisions of the above circular at sub para (i) and (ii) will not apply to fully KYC compliant accounts.”

Here is the first circular:

“On a review of the provisions ii, iii and iv at C of Para 3 dealing with credit of the value of SBNs into bank accounts it has been decided to place certain restrictions on deposits of SBNs into bank accounts while encouraging the deposits of the same under the Taxation and Investment Regime for the Pradhan Mantri Garib Kalyan Yojana, 2016 as indicated below:

Tenders of SBNs in excess of ₹ 5000 into a bank account will be received for credit only once during the remaining period till December 30, 2016. The credit in such cases shall be afforded only after questioning tenderer, on record, in the presence of at least two officials of the bank, as to why this could not be deposited earlier and receiving a satisfactory explanation. The explanation should be kept on record to facilitate an audit trail at a later stage. An appropriate flag also should be raised in CBS to that effect so that no more tenders are allowed. Tenders of SBNs up to ₹ 5000 in value received across the counter will allowed to be credited to bank accounts in the normal course until December 30, 2016. Even when tenders smaller than ₹ 5000 are made in an account and such tenders taken together on cumulative basis exceed ₹ 5000 they may be subject to the procedure to be followed in case of tenders above ₹ 5000, with no more tenders being allowed thereafter until December 30, 2016. It may also be ensured that full value of tenders of SBNs in excess of ₹ 5000 shall be credited to only KYC compliant accounts and if the accounts are not KYC compliant credits may be restricted up to ₹ 50,000 subject to the conditions governing the conduct of such accounts. The above restrictions shall not apply to tenders of SBNs for the purpose of deposits under the Taxation and Investment Regime for the Pradhan Mantri Garib Kalyan Yojana, 2016. The equivalent value of specified bank notes tendered may be credited to an account maintained by the tenderer at any bank in accordance with standard banking procedure and on production of valid proof of Identity. The equivalent value of specified bank notes tendered may be credited to a third party account, provided specific authorisation therefor accorded by the third party is presented to the bank, following standard banking procedure and on production of valid proof of identity of the person actually tendering, as indicated in Annex-5 of our circular cited above.”

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