Cap on free withdrawals a policy move: RBI tells court

The Reserve Bank of India (RBI) on Monday told the Delhi high court that a limit on free withdrawals from ATMs by banking customers is a "policy decision" and courts should not interfere in it.

"It is a policy decision. Why should the court interfere in it? The petitioners are challenging the circular of the RBI. I am challenging the maintainability of this plea," the RBI counsel told a bench of chief justice G Rohini and Justice Sangita Dhingra Sehgal.

As per RBI's new guidelines, bank customers in six metros - Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bengaluru - are allowed to withdraw money free of charge only five times a month from their ATMs and every transaction beyond this limit will be charged Rs20 per use.

RBI also informed the court that besides the five free transactions from one's own bank ATM, customers can avail three free withdrawals from ATMs of other banks. It had earlier told the bench that the ATM facility was made available with a view to reduce "cash usage and increase electronic transactions in the country".

Opening after a day's break, banks, however, continued to grapple with currency shortage forcing many branches to resort to cash rationing to meet customers' demand as many recalibrated ATMs also ran dry.

Customers started lining up outside bank branches to withdraw their salaries after ATMs failed to deliver. But banks could only offer limited cash citing shortage.

Despite recalibration of over 90 per cent of the 2.2 lakh ATMs across the country, cash vending machines are still running out of cash.

Banks expect the salary rush to continue for another 7-10 days.

Some banks are disbursing only Rs2,000 per person while those having better cash availability are offering Rs10,000-12,000 per withdrawal against specified limit of Rs24,000, bank officials said.

Many banks made 'SOS calls' to RBI for additional cash for the first week of December to meet the initial rush of people, after the payday.

In its affidavit on 1 December, the centre had said scrapping of Rs500 and Rs1,000 bank notes did not violate citizens' ''fundamental rights,'' as alleged, but imposed ''reasonable restrictions'' with a view to eradicate black money and counterfeit currency.

The centre rebutted the challenge on the legal validity of the 8 November notification. It was not an act of deprivation but regulation, it clarified.

''In the present case, the public is not deprived from using the money or the value for the legal tender possessed by them. They can still use their money by use of cheques, e-transfer, etc. The government, however, in view of the changeover of the fake notes, has for a limited period, imposed certain reasonable restrictions in the form of limited withdrawal of money and or exchange thereof,'' according to the affidavit.

Earlier, the centre had moved the apex court seeking transfer of all the petitions pending in various high courts to either the Supreme Court or one of the high courts.

It had contended that demonetisation was a 'bold move' aimed at eradicating black money circulating since Independence which cast a 'parallel economy' hitting the poor and the middle class.

The Centre has also defended its decision to introduce Rs2,000 currency notes, saying it was done keeping in view ''the erosion of purchase value of money due to rising inflation''.

There was nothing illegal in the printing of the high denomination note, it said.

The centre rejected arguments that the government has no power to demonetise as the authority is vested only with the RBI, which, it said, is under its management and control.

The RBI Act states all currency belongs to the Union government and the central bank has the right to issue bank notes that are, at any time, considered to be legal tender in circulation, it said.