That rule must have started after 2001, since I haven't been to a Grand Boasting Session since then. However, with the clamping down going on in that religion, I am not surprised. Which doesn't make sense.
The towels are small for a reason. Typically, small children need much less to dry their hands than adults. If towels were sized for adults, children would waste paper that isn't needed. So they make the towels child sized, and adults will have to use more than one towel if they are to properly dry their hands. The same goes for sheets of toilet paper--I am starting to see threads where they are handing out limited numbers of sheets of toilet paper, which is even worse than the towel rule.
And yet they can hold Waste of Paper Distribution Campaigns, wasting far more paper (which is cut from virgin forests, not second-growth trees like toilet paper and paper towels are).