Centre gives cash relief to farmers, eases loan norms

Govt fears cash crunch backlash ahead of polls

Fearing a backlash in rural areas ahead of key state elections, the government allowed farmers to purchase seeds for the rabi crops using old bank notes from state-owned outlets.

The Reserve Bank of India (RBI) also provided an additional 60 days for repayment of housing, car, farm and other loans worth up to `1 crore as a sudden government move to replace all `500 and `1,000 notes has triggered a massive cash crunch.

A senior official said that in the next 8-10 days the government’s focus will be on rural areas facing a huge liquidity crunch. The government has already allowed farmers to make cash withdrawals up to `25,000 per week against sanctioned crop loans.

The moves came amid mounting public and political pressure even as millions continued to line up before banks and ATMs to deposit or withdraw cash across states, though queues are getting shorter.

One person fainted and died on Monday while standing in a queue outside a Delhi bank. The Opposition said about 70 such deaths have taken place so far.

The RBI relaxation will apply to dues payable between November 1 and December 31. It will help keep accounts “standard” even when payments are not received. The apex bank said that this is a short-term deferment, and does not result in restructuring of loans.

The November 8 order on demonetisation made 86 per cent of the currency in circulation invalid. Restrictions on withdrawals and shrinking space for normal banking activities have also made EMI payments difficult.

Prime minister Narendra Modi had a strategic meeting with the finance minister and other officials to discuss how to deal with the situation.

Continuing its losing streak for a sixth straight day, Sensex crashed 385 points to hit a six-month low of 25,765.14 following sustained foreign outflows amid uncertainty over the economic impact of the demonetisation move.

The RBI also relaxed norms on cash withdrawals and said that overdraft and cash credit account holders can now withdraw up to `50,000 in a week. Accounts have to be operational in the last three months or more. Earlier, current account holders were allowed to withdraw up to `50,000 in cash in a week.

Government employees belonging to Group-C started receiving `10,000

in cash as salary advance for the month of November.

At least 1,000 Group-C employees working in the union home ministry were also given `10,000 each as their salary advance.

Providing some relief to Group C and D employees from the cash crunch, the West Bengal government allowed them to draw advance salary in cash. West Bengal chief minister Mamata Banerjee is at the centre of an Opposition offensive against the government.

The government earlier announced a raft of measures to ease the crisis but chaos persists as in India cash is still used in 70% of the expenses. The chaos is largely because ATMs are unable to meet a spiraling demand for cash or they are still not equipped to dispense the new bills. A large number of people in rural areas without banking facilities remain the worst hit.

Opposition parties across states escalated their campaign against the currency swap, saying it has hit consumption, hurt agriculture and real estate, and scores of people have died in queues. The Supreme Court also warned on Friday that there “may be riots” and refused the government’s plea to stay cases, filed against the demonetisation, in high courts and lower courts, saying ‘how can we shut our doors to people when there is a problem of such a magnitude.”

The government has said the move would hit at corruption and counterfeit currency, besides brining billions of dollars worth of unaccounted wealth into the mainstream economy.

`2,500 is the maximum one can withdraw from a recalibrated ATM a day. Otherwise the cap is `2,000. People can also withdraw cash from select fuel stations of stateowned oil companies. The government has said savings account holders can withdraw up to `24,000 per week and current account holders can withdraw up to `50,000 a week from banks with certain riders.

Old notes are valid till November 24 for key utilities. Exchange limit for old notes is `2,000. The government has also increased withdrawal limits for traders, farmers, and families needing money to bear wedding expenses.