Just a one-day drama: How banks coped with the RBI’s flip-flops on deposits above Rs 5,000

In the branch manager’s office of Union Bank’s Grant Road branch in Mumbai, Mohammed Farooq, a small-scale trader, was trying to explain why he hadn’t been able to deposit demonetised notes worth Rs 19,000 so far.

“I had been busy with family matters, the bank lines were very long and I thought the government had given us time until December 30 to deposit old notes,” said Farooq, appealing anxiously to the branch manager.

The manager, who looked strained from the stress of dealing with similar pleas from steams of customers, considered Farooq for a moment. Then, breaking into a grin, he said, “What to do, they seem to be changing the rules every two minutes! Just write your reason down on this form and deposit your money.”

The branch manager’s joke about rules changing every two minutes may have been hyperbolic, but at 2 pm on Wednesday, his staff was ironically unaware that the Reserve Bank of India had in fact just overturned its two-day-old rule about deposits above Rs 5,000.

Notifications No. 59 and 60

On December 19, just 11 days before the official deadline for depositing old Rs 500 and Rs 1,000 notes in banks, the RBI issued a notification giving citizens only one chance before December 30 to make deposits above Rs 5,000 in old notes. This deposit, too, was to be credited only if customers were able to give a satisfactory explanation for their delay to two bank officials.

Hours later, as indignation rippled across the country, the Finance Ministry announced that such explanations would not be demanded for deposits below Rs 2.5 lakh. This addendum, however, was not incorporated into the RBI’s official notification to banks, and on Tuesday, banks across the country had no option but to ignore the Finance Ministry media announcement and demand explanations from customers depositing more than Rs 5,000 in demonetised currency. Irate customers pointedly filled forms that explained their delays with reasons like “I trusted the Prime Minister”.

Then late on Wednesday morning, the RBI responded to public outrage by issuing its 60th notification on demonetisation: for accounts compliant with Know Your Customer rules, no questions would be asked about deposits above Rs 5,000.

‘We didn’t reject customers’

In Mumbai, news of this new notification seemed to reach different bank branches at different points through the afternoon, leading to a general air of confusion.

The Grant Road Union Bank branch, for instance, had run out of explanation forms for customers to fill, and a staff member had been sent out to photocopy more forms. But a short walk away, in a Central Bank branch, the manager flopped a pile of freshly-photocopied explanation forms on his desk and said, “These are all useless now. The rules have changed again, so this was just a one-day drama.”

The manager, who did not wish to be named, said that his staff had not rejected any customer’s explanations for delayed deposits of old notes, whether the reasons were “long lines” or “found the money in a cupboard”. “We understand that coping with change is hard,” said the branch manager. “We are coping with the 60th notification from the RBI.”

A senior staff member at a Bank of India branch in South Mumbai also claimed that no customers were turned away on Tuesday and Wednesday morning for trying to deposit more than Rs 5,000. “Rejecting customers is not our lookout. As long as they give some reason in the form, it is not for us to judge,” he said.

After six weeks of dealing with the ups and downs of demonetisation, customers and employees in several Mumbai banks seemed to have forged a new dynamic with each other. At the Union Bank branch, for instance, Mohammed Farooq shared a few laughs with the branch manager before leaving.

“The banks understand why we are angry about the cash crunch, and we also understand that the banks’ hands are tied,” said Farooq. “Only the government doesn’t seem to understand either of our troubles.”