Demonetization: RBI removes ‘explanation’ requirement for KYC accounts

The Reserve Bank of India has responded to widespread criticism of its directive to collect ‘explanations’ from those depositing more than Rs 5000 by clarifying that this directive will not apply to bank accounts with proper documentation.

“On a review of the above, we advise that the provisions of the above circular at sub para (i) and (ii) will not apply to fully KYC compliant accounts,” it said.

The move comes after people expressed displeasure over the earlier rule that required them to furnish an ‘explanation’ in front of the bank officials as why they took so long to deposit their money.

Three days ago, the RBI stipulated a rule that said: tenders of old notes in excess of ₹ 5000 into a bank account will be received for credit only once during the remaining period till December 30, 2016.

“The credit in such cases shall be afforded only after questioning tenderer, on record, in the presence of at least two officials of the bank, as to why this could not be deposited earlier and receiving a satisfactory explanation. The explanation should be kept on record to facilitate an audit trail at a later stage,” the RBI had said.

Many bank officials were confused as to what kind of ‘explanations’ were to be accepted from depositors.

There were reports that the most obvious explanation — that one was waiting for queues to end — was reportedly not considered acceptable by some bank managers.