RBI-EC war finally comes to an end with RBI lifting the withdrawal limits

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The logo for Reserve Bank of India and Election Commission

RBI recently announced its decision to lift cash withdrawal limits from all accounts, except savings account. It is said that this decision is a result of its dispute with the Election Commission (EC), wherein the EC was asking RBI to raise the limit for candidates in poll-bound states to Rs. 2 lakh a week.

On Sunday, EC had objected against RBI’s refusal to raise the cash withdrawal limit for candidates. EC said that the limit had to be raised to ensure that the candidates are able to defray election expenditure up to the limit of Rs. 28 lakh. It had asked RBI to reconsider it decision with some strong words and also mentioned that RBI was “not realising the gravity of the matter”.

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A discussion took place between RBI and EC to resolve this matter. Here, RBI pointed out two things, first one was the alleged “lack of application of mind” by the Election Commission while issuing directions to RBI to raise the Rs 24,000 weekly cash withdrawal limit to Rs 2 lakh.

A government official said, “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.”

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The second point by RBI was that it was not possible for them to remove the withdrawal limits only for the candidates.

The discussion went on for a long time and an understanding between RBI and EC was reached only after the intervention of PMO.

Finally, as RBI lifted the cash withdrawal limits for all current accounts, EC has agreed to advise its candidates to open current accounts to manage their poll expenditure.

“EC’s standing instructions asking candidates to open a separate bank account for poll expenditure do not specify whether it should be a current account or savings account. However, a majority of candidates used to open current account. Even in the current poll, all candidates in Goa are operating current accounts for poll expenses. With the latest RBI circular, the Commission will now advise candidates to open only current accounts for poll expenditure,” an official said, reported TOI.

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