Cash deposit limit also varies by the type of bank. Here’s a clear breakdown of the limits set by different banks.
For many of us, a savings account is a secure place to deposit our funds while ensuring accessibility. However, it is important to be aware of limitations, such as the cash deposit limit in a savings account, which is set by the bank and other governing bodies. This article explains what the cash deposit limit is, its types, and the implications of exceeding it.
What Are Cash Deposit Limits?
As per the Reserve Bank of India (RBI), the cash deposit limit is the amount of physical currency (cash) an individual can deposit in their savings account during a specific period. These limits are regulated by the bank, RBI, and the Income Tax Department to prevent tax evasion, money laundering, and other concerns.
Types of Limits in Indian Banking
Cash deposit limit rules are set by various authorities for different reasons. To maintain compliance and smooth operation of your savings account, it is important to know the types of limits in Indian banking.
RBI Guidelines on Cash Transactions
The Reserve Bank of India (RBI), in conjunction with other regulatory bodies, influences cash transaction rules. For instance, PAN details are generally required for cash deposits exceeding INR 50,000, irrespective of whether it's a self-deposit or a third-party deposit. Banks also have internal thresholds for third-party cash deposits, often lower than self-deposits, to manage risks under PMLA (Prevention of Money Laundering Act, 2002) compliance and track suspicious transactions.
Prevention of Money Laundering Act (PMLA) Compliance
If there are frequent large cash deposits in a savings account, it can trigger the Prevention of Money Laundering Act (PMLA). This framework states that banks are required to conduct due diligence when onboarding a customer using KYC, maintain transaction records for five years, and report suspicious activity to the Financial Intelligence Unit of India (FIU). If your cash deposits exceed INR 10 lakh in a calendar year, it will also be reported by the bank. It is important to note that the reporting is only done for monitoring purposes and to ensure that there isn't any suspicious activity.
Income Tax Act Implications
Section 269ST of the Income Tax Act broadly restricts any person from receiving more than ₹2 lakh in cash:
- in aggregate from a single person in a day; or
- in respect of a single transaction; or
- in respect of transactions relating to one event or occasion. This provision aims to curb large cash dealings and promote accountability across all types of transactions. Exceeding or violating this rule can lead to a penalty equal to the amount received
Exceeding or violating this rule can lead to penalties equal to the amount received.
Bank-Wise Deposit Limits and Variations
Cash deposit limit also varies by the type of bank. Here’s a clear breakdown of the limits set by different banks:
Public Sector Banks
PSU or Public Sector banks provide conservative cash deposit limits for their account holders. Customers can also opt to open a bank account online with higher cash deposit limits. These banks have thorough verification processes and policies for both urban and semi-urban branches. PSU banks also offer flexibility for agricultural and small business customers.
Private Sector Banks
Private banks typically provide enhanced daily deposit limits via their Cash Deposit Machines and modern ATMs. These limits often differ depending on your specific account category and banking relationship. These banks also have a more streamlined process for verifying large cash deposits using digital verification systems. These banks maintain strict compliance with regulatory requirements for safety and security against unusual transaction patterns.
Small Finance Banks and Regional Banks
These banks primarily deal with small businesses, traders, and rural communities. They offer flexibility on cash deposit limits while adhering to RBI and PMLA compliance. Customers are required to provide additional documentation in order to justify frequent large cash deposits.
What Happens When You Exceed Cash Deposit Limits
Exceeding the cash deposit limit can be considered a violation of regulatory authorities such as the RBI and the Income Tax Department, which can lead to consequences such as:
- The transaction is rejected by the bank if it has crossed the daily limit.
- The customer will be required to provide proof to the bank regarding the source of funds. This can be done by providing documentation such as salary slips or business income proof.
- Your account might get flagged for extra checking for suspicious transactions by the bank.
- Banks may temporarily freeze your deposited funds while they complete verification procedures. Your access to withdraw money from the account will be restricted until the verification process is complete.
- If there is any suspicion of any illegal activity, the bank may temporarily freeze your account until you provide explanations and documentation for the deposit.
Conclusion
Understanding cash deposit restrictions helps you plan your banking transactions better and avoid unexpected complications. Always verify your specific bank's current policies and consider alternative methods for transferring money into your account when needed. By choosing the right account type that matches your cash transaction patterns and staying informed about regulatory requirements, you can optimize your banking experience and avoid penalties or unnecessary delays.
