The Hindu Business Line : Cash withdrawal tax may turn into nightmare for banks

THE taxman's noose that is chasing customers who withdraw large sums of cash from their bank accounts, is sending shivers through another set of people who feel that they might eventually turn out to be major victims of the new tax — the bankers themselves.

The banking industry is spending anxious moments over the huge administrative burden that would be thrust upon it by the Government's proposed move to levy a 0.1 per cent tax on cash withdrawals of Rs 10,000 or more by a person in a single day.

Top bankers said that implementing the new tax would be a major headache for the banking system for which it was ill-prepared. "How can we issue revenue slips for tax collected on each and every such withdrawal? It would be a great hassle for the banks. This is so cumbersome that it would be virtually impossible to implement," the Chairman and Managing Director of a large public sector bank said.

Another top banker told Business Line that the tax proposal could seriously affect the business of banks. "Many people, who have to withdraw large amounts of cash for their daily business purposes, would be unwilling to park their money with the banks. Since no one wants to run into trouble with the tax authorities, they would like to stay away from the formal banking system," the chief of a bank said.

Bankers pointed out that branches located in areas with a large concentration of traders would be hit the most. "Traders need large amounts of cash everyday for their business payments. This lot would never want their bank transactions records to land up with the tax authorities," a CMD of a bank said.

"Most customers would break up the amount to less than Rs 10,000 and increase their frequency of transaction. That would add to the banks' costs," one banker said.

He said that the Government should work out ways to reimburse the banks for the additional administrative cost incurred on account of the move to impose the new tax.

Bankers said that that implementing the measure would be a major problem in rural areas and in branches that are not fully computerised. Only one Chief of public sector bank sent out a divergent reaction. "I don't see this as a big problem. We have to start somewhere. If the Government asks, we have to give the details," he said.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Farm credit target: Easier set than met

Govt studying report on MTNL-BSNL merger

TN jewellers down shutters in protest against Central levy

`World's second longest bridge' — Six consortiums in fray for Rs 4,000-cr sea link

Infosys proposes to set up new campus in Bangalore

Cash withdrawal tax may turn into nightmare for banks

Sensex hits all-time high — 1,771 stocks gain, 651 decline on BSE

What they say...

PNB sets price band at Rs 350-390 — Minimum application size 15 shares