NEW DELHI - India may soon relax conditions for cash withdrawals for weddings, a top government official said on Tuesday, the day after the central bank issued rules for such bank transactions widely criticised as unworkable.
Prime Minister Narendra Modi's shock announcement on Nov. 8 that he would scrap high-value banknotes, to curb untaxed "black cash" circulating in the economy, came in the middle of India's cherished wedding season.
Families, rich and poor, go to huge lengths to celebrate weddings in India. A politician in Modi's party drew massive criticism - and the attention of tax inspectors - after spending a reported 5 billion rupees ($73 million) to stage his daughter's wedding after the cash crackdown.
Under rules set by the Reserve Bank of India (RBI), cash withdrawals up to 250,000 rupees ($3,700) are permitted only for payments to those holding weddings who have no bank account. The rules also mandate disclosing the names of all such recipients.
The money can be withdrawn only if the date of marriage is on or before Dec. 30, the deadline for relinquishing all old, high-value currency notes.
"We have got complaints from various quarters about these tough conditions," the finance ministry official told reporters, declining to be named as the proposal was still under discussion. "We could relax some of the conditions soon."
With just a small stock of smaller denomination notes available and people struggling to get hold of new 500 and 2,000 rupee bills, consumers are holding back spending and businesses are suffering.
Banks received 5.4 trillion rupees ($79 billion) in deposits from Nov. 10-18, or nearly a third of the cash in circulation in India, while only around 1 trillion rupees was withdrawn.
Finance Minister Arun Jaitley expects extra deposits in banks to push down interest rates, ease the flow of credit and boost private investments. That would help growth to pick up after the initial disruption from the cash crackdown.
But analysts like Ambit Capital, a Mumbai-based equity research firm, say the cash crunch could result in GDP growth crashing to 3.5 percent in the current fiscal year ending March 2017, from 7.6 percent in the previous year.
Opposition parties led by Congress have stalled proceedings in parliament, demanding a reply from Modi and compensation for the families of dozens of people reported to have died while waiting in long queues outside bank branches to swap old money for new.
Modi's government has tinkered with the so-called demonetisation drive to compel tax evaders and racketeers to come clean, and has launched an online survey to elicit public views on his decision. He plans a radio address on Sunday.
($1 = 68.2754 Indian rupees)