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[MUMBAI] India's central bank tightened cash deposit rules on Monday, just days before the demonetisation deadline, saying individuals can bank over 5,000 rupees (S$107) of old notes only once until Dec 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 250,000 rupees of old currency notes with banks till Dec 30. Customers with amounts above that level had to provide an identification number known as the permanent account number.
However, the central bank in a circular said that any deposit above 5,000 rupees 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 12.44 trillion rupees 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 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.