Lifting cash withdrawal cap to end EC-RBI tiff

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NEW DELHI: RBI’s lifting of cash withdrawal limits from all types of bank accounts barring savings accounts was an unintended consequence of its dispute with the Election Commission over raising this limit for candidates in poll-bound states to Rs 2 lakh a week.

The EC had on Sunday objected to RBI’s refusal to raise weekly cash withdrawal limit for candidates to Rs 2 lakh from Rs 24,000, arguing that the step was needed to ensure that candidates are able to defray election expenditure up to the statutory limit of Rs 28 lakh for UP , Punjab and Uttarakhand, and Rs 20 lakh for Goa and Manipur. The panel had, in a strongly-worded communication asking RBI to reconsider its decision, rapped it for “not realising the gravity of the matter”.

During discussions between EC and RBI on Monday to resolve the issue, the Central bank representatives are known to have pointed out two things. One, the alleged “lack of application of mind” by the EC while issuing directions to RBI to raise the Rs 24,000 weekly cash withdrawal limit to Rs 2 lakh. “All EC needed to do was to insist on candidates operating current accounts for poll expenditure, for which the limit was Rs 1 lakh, much higher than the savings bank withdrawal limit of Rs 24,000 a week. It could have at most requested RBI to raise this limit to Rs 2 lakh, rather than making a rather impractical suggestion of increasing the savings account withdrawal limit by over 8 times,” said a government official.

Second, RBI underlined that it was not possible for it to relax the withdrawal limits exclusively for candidates and that any such relief would have to be across-the-board. A rapprochement was reached in the RBI-EC standoff only after intervention by the PMO.

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