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RBI's U-turn: Rs 5000 deposit limit withdrawn for KYC-compliant accounts

In a sharp U-turn, the Reserve Bank of India has withdrawn the restrictions imposed on bank deposits exceeding Rs 5000 in old notes. 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.

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.

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".