Exchange of old Rs 500, Rs 1,000 notes worth Rs 4,000 allowed only once till RBI review

The limit to exchange old notes of Rs 500 and Rs 1000 is Rs 4000 till further review by the RBI and NOT per day as has been misunderstood by some people. The Frequently asked Questions (FAQs) on the RBI website and the notification regarding de-monetisation mention that old notes of Rs 500 and Rs 1000 can be exchanged at bank or post office branches till December 30, 2016 up to a value of Rs 4000 by filling up a form and providing ID proof. The notification regarding this does not state that this is 'Rs 4000 per day'.

The above is clear from the notification issued on November 8 regarding "Withdrawal of Legal Tender Character of existing Rs 500/- and Rs 1000/- Bank Notes". Regarding 'Provision of Exchange Facility', this notification states that the old de-monetised notes can be exchanged at any Issue Office of the Reserve Bank or any branch of public sector banks, private sector banks, foreign banks, Regional Rural Banks, Urban Cooperative Banks and State Cooperative Banks for a period up to and including the 30th December, 2016, subject to the following condition:

(i) the specified bank notes of aggregate value of Rs 4,000/- or below may be exchanged for any denomination of bank notes having legal tender character, with a requisition slip in the format specified by the Reserve Bank and proof of identity; the limit of Rs 4,000/- for exchanging specified bank notes shall be reviewed after fifteen days from the date of commencement of this notification and appropriate orders may be issued, where necessary.

This implies that the limit of Rs 4000 per person is at one time exchange allowed till this decision is reviewed 15 days from November 8 i.e. on November 22nd. Two bank branches that this correspondent visited were also following this principle. Further, RBI has not issued any clarification to the contrary so far.

However, quite obviously this rule is being currently circumvented by people visiting branches of different banks with the same ID proof or with different ID proofs. It appears unlikely that given the short time at their disposal and the current pressure of work bank officials would be able to cross check with branches of other banks.

The confusion has arisen because of the RBI instructions regarding cash withdrawals from ATMs, which state: Withdrawal from ATMs shall be restricted to Rs 2,000 per day per card up to 18th November, 2016 and the limit shall be raised to Rs 4,000 per day per card from 19th November, 2016. However, it is to be noted that when a person is withdrawing from the ATM he/she is drawing from his/her own bank account and NOT exchanging notes. Quite obviously, RBI has restricted the exchange of notes to Rs 4000 per person till further review.

Since all the instructions regarding withdrawal from ATM and savings account have been specified for per day, it has been inadvertently assumed that exchange of old notes worth Rs 4,000 limit is also per day.