The Reserve Bank of India (RBI) lifted the withdrawal limit on savings account from Monday putting an end to withdrawal policies related to demonetisation.
The RBI in a notification on February 8 had said that it would enhance the withdrawal limit on saving accounts in two phases. From February 20, 2017 the limit on cash withdrawal would be increased to Rs 50,000 per week and from March 13, 2017, there would not be any limit on cash withdrawals.
The government had given citizens a 50-day period to exchange old Rs 500 and Rs 1000 notes after Prime MInister's shocking announcement on November 8 to ban these two notes. The RBI has not yet revealed the total number of old notes that was removed from the banking system and the number of new notes that were pumped in.
Prime Minister Narendra Modi's announcement on November 8 had led to long queues at ATMs and complete chaos at banks as people thronged to return old currency notes. The shortage of Rs 500 and Rs 100 notes till the RBI issued new Rs 2000 notes had created panic as people were left cashless.
The RBI and the government, meanwhile, made over a hundred changes in rules related to use and exchange of the old Rs 500 and Rs 1000 notes. The issue had led to worries that the economy would get badly hit with many economists raising doubts over the merits of the decision.
Some of these concerns were put to rest as India's economy performed better than expected at 7 per cent in the third quarter of this financial year. Gross domestic product (GDP) growth slowed to an annual 7.0 percent in October-December from 7.4 percent the previous quarter. Analysts had expected a slower growth rate.
The figures meant India's growth was higher than China's 6.8 percent for the last three months of 2016 making it the world's fastest-growing major economy, despite the cash crackdown.
The figures, however, surprised economists, who had expected the economy to take a bigger hit from the government's decision to outlaw old 500 rupee and 1,000 rupee banknotes, taking out 86 percent of the currency in circulation virtually overnight.
"Perhaps this data is not capturing the impact of demonetisation," said Aneesh Srivastava, chief investment officer, IDBI Federal Life Insurance Co. "I am totally surprised and stunned to see this number ... I believe that, with a lag, we will see an impact on GDP numbers."
Bibek Debroy, member, Niti Aayog, in a recent interview to Business Today suggested that those who raised doubts over the GDP numbers did not understand how they are calculated and that he would not be surprised if the GDP growth accelerated due to demonetisation.
"I am saying anyone who's sceptical about the GDP number should understand GDP and then ask having understood GDP, what should I expect from the GDP numbers. So, I am actually prepared to believe that due to demonetisation, the GDP has actually increased," said Debroy.