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Modi’s speech a balm for demonetisation pain, PM doles out sops for weaker sections

Prime Minister Narendra Modi has announced interest rate subsidy for housing of the poor and also waived off interest rate for farmers, in an effort to address the pain endured by the weaker sections of the society following his demonetisation decision. However, Modi did not provide any clarity on the note ban exercise or its impact on the economy.

Narendra Modi gestures as he addresses the nation on New Year's Eve, PTINarendra Modi gestures as he addresses the nation on New Year's Eve, PTI

Narendra Modi gestures as he addresses the nation on New Year’s Eve, PTI

In a televised address on Saturday evening, Modi praised the spirit shown by Indians and their sacrifice in fighting black money. “The problems which the people have faced for the betterment of the country is an example in itself,” Modi said, in the speech aired all over the country.

The demonetisation of Rs 500 and Rs 1,000 currency notes from 9 Novmeber — as much as 86 percent of currency in circulation — created a cash crunch in the country, as the government and RBI were not ready with the replacement currency.

Even after 51 days, banks and ATMs are still not replenished with enough cash to meet the demand from the customers. The non-availability of cash in hand has resulted in a slump in the economy, as scores of informal sector jobs have been lost and consumption declined.

The sops announced on New Year’s Eve may come in this context.

In an effort to balance out the pain for the poor, who have been the worst-hit, the prime minister announced two new housing schemes. According to the first scheme, for home loans up to Rs 9 lakh in urban areas, an interest rate subsidy of 4 percent will be given, and for loans up to Rs 12 lakh, the subsidy will be 3 percent.

Secondly, for the rural poor, Modi announced a 3 percent interest subvention for loans up to Rs 2 lakh.

Apart from this, for farmers, the government will bear a 60-day interest for loans taken from primary credit societies and district cooperative banks.

The third scheme is the increase in the credit guarantee for the small traders to Rs 2 crore from Rs 1 crore. The note ban has broken the MSMEs as the sector has witnessed a decline in business post the demonetisation announcement. The increase in the credit guarantee is an effort to address their pain.

First Published On : Dec 31, 2016 20:56 IST

Demonetisation: The objective of accountability behind the ordinance extinguishing old notes

What was the agenda behind the cabinet approval for promulgating of an ordinance extinguishing the Reserve Bank of India’s liability for cancelled Rs 500 and Rs 1,000 notes? Was it a mere fulfilment of legal formality so as to prevent chances of someone claiming his right to encash disbanded notes on the basis of a promise to pay the bearer? If it was to fulfil only mere legal formalities, then the obvious question will be on what basis circulation of these very currency notes were made illegal with effect from 8 November midnight? Being a layman in legal matters, I leave it to the concerned experts to ponder over it.

Representational image. PTI

Representational image. PTI

What else could be the motive behind the move now? Out of Rs 15.4 lakh crore scrapped currency notes, already Rs 14 lakh crore, which is a whopping 90.9 percent, have already come back to the banking system. By any standard, the current step is a major success, one aimed at making unaccounted income accountable. This is a clear indication of the grip of the incumbent government. It also indicates how seriously people take decisions initiated by the prime minister.

Assuming that still around Rs 1 lakh crore do not get accounted, nobody would have shown guts to claim its value merely on the basis of promise to pay the bearer. That would have remained as mere pieces of paper. At the most, these scrapped notes would have got the honour of getting exhibited under palliate clubs. Anyway, the government’s treasury would have got enriched by an amount equivalent to unclaimed part of scrapped currency notes which may not be more than five percent of the scrapped notes.

What could be the hidden agenda? What would be implications of the ordinance? It definitely reflects determination of the prime minister to tackle menace of black money for which he was given mandate by the people. Among those who declared their income, there will be those who end up paying penalty for not filing returns on time. At the most, their social image may get tarnished. But they don’t have alternate escape route under the determined government.

Who are these persons who don’t mind their ill-gotten wealth getting drained away? Obviously, these are the persons who simply cannot afford to declare their income and pay penalty as other simpletons have done. In this case, resolving of one problem means getting trapped into a much more dangerous web. How can corrupt politicians and bureaucrats declare black money and get away by simply paying penalty? Instead of resolving the problem, it would lead them into a deeper trap. It would automatically lead to investigation about sources of their income. They would end up accepting bribe which means likely end of their career and jail term.

It also has to do with nature of the person called Narendra Modi. Once he takes initiative to reach the target, he is known for trying to achieve it at any cost and go forward with the killing spirit. Perhaps the prime minister is determined to clean up the entire political spectrum and government machinery without sparing anybody. In the process, he may have to sacrifice many of his own colleagues apart from taking on political opponents. No doubt, it is really a bold step. It looks like the prime minister is aware of tremendous risk involved. His real support and strength in this fight against black money is from common men. Despite facing hardship of standing in queues for hours together, they still stand by the Prime Minister. In fact, the measure initiated by the prime minister to tackle black money has become a true people’s movement today. Any movement blessed by people is bound to be a success despite numerous hurdles.

(Dr Jagadish Shettigar is a former member of Prime Minister’s Economic Advisory Council and currently, Economics Professor at Birla Institute of Management Technology, Greater Noida.)

First Published On : Dec 31, 2016 17:25 IST

Demonetisation: Rs 4,500 per day ATM limit is of little help when 2/3 machines run dry

ATMs will dispense a maximum Rs 4,500 per day per account holder beginning 1 January, said a circular from the Reserve Bank of India (RBI) on Friday. Friday marked the end of the 50-day period Prime Minister Narendra Modi promised he will take to bring back normalcy after the demonetisation of Rs 500 and Rs 1000 notes on 9 November. Earlier, daily limit was Rs 2,500 per day. An enhanced limit is a relief for citizens and will help to shorten queues further, but only in areas where ATMs are dispensing cash.

The problem is only a third of the total ATMs in the country (around 2 lakh) are dispensing cash and most of them are in urban centres with the periphery areas continuing to run dry, according to reports (read here and here). In other words, the enhanced ATM withdrawal limits would not help the people in non-metros much.

PTI file photoPTI file photo

PTI file photo

Banks are unable to fill their ATMs on account of an acute cash shortage, especially lower denomination notes that is persisting even after 50 days of demonetisation and the situation is unlikely to get better soon, said a few bankers this writer spoke to.

“We are looking at February-March before things become normal,” said one of the bankers. This is the reason banks have asked the government to extend the curbs on cash withdrawals beyond 30 December till the time there is adequate quantity of new currency infused in the banking system. Ultimately, it is the banker who has to face the angry customer.

The RBI has retained the weekly cash withdrawal limit of Rs 24,000. But, the problem is that banks are unable to honor even that amount and the customer is forced to often settle for what is available at the moment at the bank counter. Of course, this situation will ease further in the weeks ahead, but much depends on the ability of government mints to churn out sufficient units of new currency. Until 19 December, the RBI has infused Rs 5.92 lakh crore of currencies into the system, which is less than half of what the public has deposited in the form of invalidated notes (Rs 12.44 lakh crore as on 10 December).

On Friday, PM Modi launched a new payment app, BHIM, that allows anyone to transfer money to any bank accounts. The PM stressed on the need to embrace cashless payment modes at the earliest and elaborated on the incentives government planning to encourage individuals and merchants using electronic payment modes. A change into cashless economy is indeed good in an aspiring economy and government initiatives, such as UPI-supported BHIM app, are helpful to facilitate such a migration.

But, Modi’s immediate challenge remains to 1) normalise the cash situation in the economy; and 2) give a convincing cost-benefit analysis of the demonetisation exercise to 125 crore Indians. Modi has a major task of justifying his act that has pushed the economy into an economic standstill and has caused gross inconvenience to a large number of the population due to the lack of preparedness of the government to implement the currency swap.

When PM address the nation on the New Year Eve, there are questions he’ll need to answer on how did the note ban help the country to achieve the originally stated goals — black money, fake currency, corruption and terror funding. Also, most critically, the general public would expect clarity from the PM on when the cash crunch will end. The 50 days the PM sought has, for sure, eased the pain to an extent, but has not ended the cash crunch.

Another question the PM owes answer is clarity on the political funding. Though his government has repeatedly assured that rules will be same for all, there is lack of clarity on political funding since the government also says that provisions of existing laws will continue.

This would means that political parties will enjoy certain immunity from tax scrutiny since cash donations below Rs 20,000 do not require the source to be revealed. Can Modi score a point by stating that the government will work towards the necessary changes in laws to make all political donations through digital mode? If yes, that’ll be much bigger catalyst in the process of creating a cashless economy than announcing lucky draws.

For now, when the PM addresses the nation on the eve of new year, the big question common man probably would want to ask the PM is how long the current cash shortage will continue.

First Published On : Dec 31, 2016 11:28 IST

Demonetisation broke the myth that the powerful cannot be harmed: Shivraj Singh Chouhan

Bhopal: Terming the demonetisation decision as “historic”, Madhya Pradesh Chief Minister Shivraj Singh Chouhan said Prime Minister Narendra Modi with his “courageous” call broke the myth that powerful people can’t be harmed in the country.

“India witnessed a historic decision on November 8, 2016. This day has given a meaningful reply to the queries raised by the people at large on the style of functioning of governments.”

File image of Shivraj Singh Chouhan. AFP

File image of Shivraj Singh Chouhan. AFP

“Often allegations are levelled against the governments that they can not take tough decisions under pressure. They fear to take decisions that could harm powerful people,” Chouhan said in his blog on the issue on Thursday evening.

“Our PM has broken the myth with his courageous decision to demonetise Rs 500 and Rs 1000 currency notes,” he said.

“The decision of demonetisation is historic in a way that it surprised everyone and this is the distinct feature of it. India has seen decision of demonetisation twice in the history of 100 years but those decisions gave ample time to the people having black money in the form of currency to change it.

“Thus the main objective of the decision was partially met. This time, however the decision did not give any time to people with black money,” the Chief Minister said.

Those criticising the decision say that it could have been taken with better planning and people should have been given ample time. It is beyond my comprehension as to whom these critics are referring to when they talk of giving time to people, he wrote in the blog.

“Who are those about whom critics say time should have been given to them. It is obvious that they are favouring those who had black money in the form of currency,” Chouhan said.

The decision of the Prime Minister to encourage cashless transaction is to transform the country from a developing nation to a developed one. All the aspects should be examined before criticising such a move, said Chouhan.

The Congress and other political parties say that demonetisation has wrought havoc on farmers and they could not sow on time.

In Madhya Pradesh, this year already sowing has been done on 105 lakh hectare so far as compared to a total of 108 lakh hectare last year. The sowing will further go up to 115 lakh hectare. It is clear that sowing has not been affected, he said.

“Those who opine that cashless transaction is not possible in this country, are challenging the wisdom and capacities of the 120 crore people of the nation without testing it. This is injustice to the people. The last two months have witnessed an impressive 77 percent increase through internet banking in the Central Bank of India in Madhya Pradesh alone,” said the chief minister.

Referring to VAT, he said “Another benefit of cashless transaction is also very clearly perceptible. In December the VAT revenue has increased 14 per cent whereas there was a fall in revenue from other taxes.

“This makes it amply clear that the tax evasion that took place in cash transaction has reduced in cashless transaction. This will improve tax collection and the state governments will be able to spend more on welfare schemes.”

“I have always believed that the people are wise enough to know what is in their interest. They are fully aware that the Prime Minister’s step of demonetisation is a masterstroke against those indulging in amassing black money, anti-national activities and circulating counterfeit currency in the market.

“The people very well understand that this is a step in the interest of the country and are extending wholehearted support to promoting cashless economy. This will definitely help India catch up with the most developed nations,” he added.

First Published On : Dec 30, 2016 15:17 IST

Demonetisation Day 50: Feudal nature of criticising Modi is truly rotten, says NDTV’s Ravish Kumar

While it is true that demonetisation of Rs 500 and Rs 1,000 notes may not have led to the rosy picture which the central government had been painting till now, some of the criticism against the government and Prime Minister Narendra Modi is truly rotten. And journalist Ravish Kumar hit the nail on the head in this op-ed piece in NDTV, where he writes about the feudal nature of the punishment which a section of people think the prime minister should face.

There have been a considerable number of cheap posts on social media which directly or indirectly talk about throwing shoes at the prime minister.

Kumar pointed out how wrong it was to use such language against any person by explaining how this was linked with casteism.

Senior journalist Ravish Kumar. Screengrab from YouTube video

Senior journalist Ravish Kumar. Screengrab from YouTube

“Hitting someone with a shoe is in principle anti-Dalit. If you investigate stories about hitting someone with a shoe, you will find that this sort of language was used only by those who were upper-caste. And this was done only against the Dalits or weaker sections of society. Hitting someone with a shoe is the language of hate. I hate the language of hate as much as I hate the politics of hate,” Kumar wrote in the article.

Kumar, the senior executive editor of NDTV India, added that it was also true that the prime minister may have himself encouraged mob mentality when he said that he would “willingly stand at any public square you select, and accept any punishment the country decides to give me…”

Ravish Kumar’s article raises a pertinent point: Criticism, even in its most severe form, is essential for democracy but any criticism which encourages violence, whether against the prime minister or the common man, is uncalled for.

First Published On : Dec 30, 2016 14:19 IST

Demonetisation: 56% of Kerala’s economic activity in doldrums, finds govt panel

The NDA government’s surprise demonetisation of Rs 500 and Rs 1,000 notes has hit both leading and struggling sectors of the Kerala economy hard, pulling the state’s economy down and affecting potential resource mobilisation, a study by a panel has found.

The committee, set up on 23 November, is headed C P Chandrasekhar of the Centre for Economic Studies and Planning of the Jawaharlal Nehru University.



“Cash-intensive sectors such as retail trade, hotels, and restaurants and transportation account for over 40 percent of the Kerala economy, and the primary sector accounts for another 16 percent of the economy. Thus, 56 percent of the economic activity of Kerala is immediately affected by the withdrawal of specified bank notes,” an interim report submitted by the five-member committee has said.

According to the report, the impact of demonetisation in terms of the cash deficit and its consequences has been particularly severe in the state also because of the distinct character of its banking sector, where the cooperative sector and the primary agricultural cooperative societies (PACS) play a central role.

Prime minister Narendra Modi on 8 November announced the decision to demonetise Rs 500 and Rs 1,000 notes, sucking out about 86 percent of Rs 15.44 lakh crore currency in circulation. As the RBI was not ready with the replacement currency, this resulted in a cash crunch, which has negatively impacted the daily lives of common people across the country and in turn the economy.

People have been given time until 30 December to deposit their old notes at banks and RBI counters. The government had also allowed exchange of these notes during the period, but did a U-turn and withdrew the facility from 25 November.

According to the Kerala government panel’s report – the first study on demonetisation and its impact – the notifications issued by the RBI, particularly the one that was issued on 14 November, which kept the cooperative banks and societies out of the note exchange process, were particularly damaging for Kerala.

The study estimates that there are about 14,000 co-operative societies in the state, including the state co-operative bank, the state agricultural and rural development bank, district co-operative banks, urban banks, primary agricultural and rural development banks and primary lending societies. These institutions are central to financial intermediation and inclusion in Kerala, the report has said.

Around 60 percent of all deposits are in the co-operatives in the state, according to the report.

Rolling out the figures, the report said besides not being allowed to exchange the notes, the access of PACS to currency was cut off. This forced these institutions to shut down their operations.

As far as the fisheries sector is concerned, cash crunch has hit the payments for fish auctioned at the point of landing, payments of wages by boat owners, supply to wholesalers and retailers, etc.

“As business has declined, workers get less work and lower earnings, and have had to get into debt to meet their daily expenses,” the report said.

In the tourism sector, the report estimates that the domestic tourist arrivals in November fell by 17.7 percent on year and foreign tourist arrivals by 8.7 percent. In October, the tourist arrivals had seen 5.2 percent and 6 percent increase respectively.

First Published On : Dec 29, 2016 15:48 IST

Demonetisation: Cabinet to decide on note ban ordinance today; another U-turn on cards?

The Union Cabinet meeting today is likely to take up an ordinance to end the legal tender of the demonetised Rs 500 and Rs 1,000 notes, media reports say. The ordinance will also likely specify the date when the notes will become illegal, which is widely speculated to be 30 December.

There have also been reports saying the ordinance is likely to impose penalties on anyone possessing the junked notes beyond 30 December when the deadline to deposit them in banks expires.

However, there has not been any official word on the move.



The ordinance will formalise the demonetisation, which was an executive decision announced on 8 November. According to a report in The Indian Express, which quotes a government official, this is a requirement as otherwise the demonetised notes will continue as a legal tender.

“If we do not put an end date on the legal character of the old notes, then they can be infinitely valid as a legal tender,” the official has been quoted as saying in the report. Explaining the rationale, he also said ending the legal tender of all notes on 30 December is important as it will clear the uncertainty for the government on how much money has flown into the system.

The ordinance will extinguish the liability of the government and RBI towards the promise to pay the bearer of these notes their value because of a statutory requirement.

In 1978 a similar ordinance was issued to end the government’s liability after Rs 1,000, Rs 5,000 and Rs 10,000 notes were demonetised by the Janata Party government under Morarji Desai.

According to the official cited in the IE report, the deposit of old notes will be allowed after 30 only in cases of exigencies.

However, if the government decides the cut-off date as 30 December that will be another U-turn by the government and the RBI. Prime minister Narendra Modi had on 8 November said the RBI window to deposit these notes will remain open beyond 30 December until 31 March. An ordinance that seeks to end the deposits on 30 December would mean the government and the RBI are going back on another promise they made to the common man.

The government had while announcing the demonetisation of the old currency allowed holders to either exchange them or deposit in bank and post office accounts. While the facility to exchange the old notes has since been withdrawn, depositors have time until Friday to deposit the holding in their accounts at the bank branches.

Media reports earlier said there could be a cap of holding no more than 10 notes of each after 30 December and violation of the rule could draw a fine of a minimum of Rs 50,000 or 5 times the amount in question — whichever is higher. However, there was no confirmation on this.

For those depositing any accounted funds, or black money, it has offered them an amnesty provided they paid 50 percent of it as tax and penalties and parked a quarter of it in a zero-interest bearing deposit for four years.

Out of the Rs 15.44 lakh crore worth of 500 and 1000 rupee notes in circulation on November 8, close to Rs 13 lakh crore have been deposited in accounts or exchanged for valid currency.

With PTI

First Published On : Dec 28, 2016 08:37 IST

Demonetisation: Farmers to get 60 additional days for repayment of crop loans, says RBI

Mumbai: The Reserve Bank of India (RBI) on Monday said that in view of demonetisation of Rs 500 and Rs 1,000 notes, farmers, whose short term crop loan repayment date falls between 1 November and 31 December, will get an additional 60-day grace period.

Representational image. Reuters

Representational image. Reuters

“In view of the constraints faced by farmers for timely repayment of loan dues on account of withdrawal of legal tender status of Specified Bank Notes (SBNs), it has been decided by the government to provide an additional grace period of 60 days for prompt repayment incentive of 3 percent to those farmers whose crop loan dues are falling due between 1 November and 31 December,” RBI said in a notification.

Currently, according to the existing crop loan interest rebate scheme for 2016-17, apart from the two percent annual rebate, an additional interest rebate of 3 percent is also provided if the farmer repays the loan up to the actual date of repayment or the date fixed by banks for repayment, whichever is earlier.

This benefit does not accrue to those farmers who repay after one year of availing such loans.

If the farmers, whose crop loan repayment date falls between 1 November and 31 December, repay the crop loan within 60 days from their loan repayment date, the additional three percent interest rebate will continue to apply, it said.

First Published On : Dec 26, 2016 20:56 IST

Demonetisation: Note ban adds to cotton farmers’ misery in AP and Telangana

Crop losses, mounting debts and a spate of pest attacks apart, the cotton farmers of Telangana and Andhra Pradesh now have to deal with the demon of demonetisation as well.

“The note ban has been a worse epidemic than the white fly or pink bollworm for cotton farmers,” says Konda Surekha, a former minister from Warangal, one of the most prominent cotton-growing areas in Telangana. These farmers are sour that Prime Minister Narendra Modi had picked a wrong time for banning big currency notes — the harvest period of the Kharif season for cash crops like tobacco, tomato, groundnut, sugarcane and cotton. Now prices have fallen by 20 to 30 percent and they are unable to clear loans due to the ushering-in of the cashless regime in agricultural markets.

“My cotton stock withered at the market yard as traders said they had no cash to pay and offered cheques,” said Jagarlamudi Anil Babu, a cotton farmer of Prakasam district. Farmers say that banks would rather adjust cheques towards loans and interest than disburse cash.

A variety of issues abound for the cotton and textile industry like the non-implementation of the promised loan waiver, the delay in institutional credit and fall in global demand.

Cotton farmers in five districts of Telangana and six districts of AP are wringing hands in distress as cotton prices crashed to Rs 4,100 per quintal from Rs 5,600 per quintal in the pre-demonetisation period. “Adding to our woes, the traders are asking us to accept payments in cheques or scrapped notes of Rs 500 and Rs 1,000,” says a cotton grower from Inkollur in coastal Andhra who deferred cotton-plucking for a week due to demonetisation.

Representational image of a cotton-gatherer in Warangal. AFP

Representational image of a cotton farmer in Warangal. AFP

The RBI decision to allow scrapped notes circulation among farmers in marketing their produce and also purchase of seeds and fertilisers has given them temporary relief, but Telangana’s farmers say that Modi should have chosen mid-January to February for demonetisation. A cascading impact is evident from the distress on cotton farmers — weddings, house warming functions and thread ceremonies are either low-key affairs or deferred. Besides cotton, the tobacco industry is dominated by 70 percent cash transactions in the vicious circle of growers, lenders, commission agents and exporters.

Andhra Pradesh and Telangana contribute to one-third of the country’s cotton trade. Chirala in Guntur and Siricilla in Karimangar are popular for their handloom and lungi markets and concentration of looms – they are considered the biggest in Asia for exports to Sri Lanka and Bangladesh.

According to the US-based International Cotton Advisory Committee (ICAC) the currency crunch in India has created shortages in domestic textile market and also hit exports to global markets. Cotton exports from Australia, Mali, Burkina Faso and the US could fill up the gap caused by Indian cotton in 2016-17. The ICAC report also blamed the note ban as an ‘untimely move’ detrimental to the Indian cotton market, which could have a domino effect for the next two years.

Officially 21 cotton farmers had committed suicide in 2016 from June to December. Unofficially though, 61 farmers have committed suicide since June and 12 more in the months of November and December.

Since its birth as a new state in June 2014, Telangana has recorded 1,269 suicides. The Hyderabad-based Centre for Sustainable Agriculture (CSA), estimates farmer suicides in Andhra Pradesh in the past 20 years (1995-2014) at 38,000. Lack of access to institutional credit and low crop insurance add to farmers’ woes. “Besides, in anticipation of loan waivers, a large number of farmers did not repay loans last year, and banks have refused loans this year,” points out GV Ramanjeyulu, executive director of CSA.

“They take up crops in Kharif with high interest loans and high expectations to wipe off old dues but often end up adding to their debts and consequent suicides,” says K Changal Reddy, a farmers’ representative.

 Local common sense

In many parts of Telangana and Andhra the crisis has been tackled with local common sense. “Farmers are deferring payments to daily wagers but pay partly in the form of rice and also stood guarantee to small loans taken by them in the local grocery shops,” says Palaparthi Srinivasa Rao, a cotton farmer of Srikakulam. Traders linked payments to fertilisers and seed suppliers for the benefit of farmers. “We also tied up with lorry operators and hotels to pay their dues from the amounts due to them,” says Gopalakrishnaiah, a cotton exporter in Guntur market.

Kuvulu Rythu Sangam (Andhra Pradesh Tenant Farmers’ Association) state secretary N Ranga Rao says that for the Kharif crop season, farmers needed Rs 3,200 crores to take up harvesting in about 40 lakh acres. Another Rs 2,400 crores is needed for the Rabi season. “Since private money lenders also do not have valid currencies now, we depend on government to release crop loans early,” he said.

The monthly report of the Cotton Corporation of India (CCI) said the cotton market in Andhra Pradesh, one of the major producers in the country, has plunged into a deep crisis in the aftermath of demonetisation, as trade and export transactions have almost come to a halt and cotton prices have slumped by Rs 1,000 per quintal from Rs 5,000 to Rs 4,100 in just 40 days. Though the CCI has opened over 40 purchasing centres and offered cash payments in Rs 2,000 notes, the farmers are unwilling to sell and choose to suffer rather than sell at the current prices.

Arrears in loan waiver payments

Although both Andhra and Telangana government announced farm loans waiver as a poll promise, they have been paying dues to banks in installments. Telangana government had pegged arrears at around Rs 18,000 crores and Andhra had reduced the burden to Rs 36,000 crores. Banks were advised to issue new crop loans with the promise that loans as of June 2013 would be borne by the government. However, the RBI had opposed the bulk farm loan waiver initiative of both the states and advised banks to release only crop loans in a guarded manner and ensure that until clearance of arrears, farmers’ slates would not be cleaned.

As a result, banks refuse to give fresh loans until old loans are either paid by the farmer or by the state government. As a result, farmers had to take up farming with savings and loans from private money lenders. “My money lender wants cash and not cheque,” says Bharatakka, a cotton farmer of Ibrahimpatnam in Nalgonda district.

Cotton crop grown in Andhra is sent to the ginning mills of Guntur district which supply cotton to textile mills in Maharashtra, Tamil Nadu, Gujarat and Karnataka. According to market sources, almost 70-80 percent of transactions have come to a halt and the market has been hit hard. This has meant the denial of wages to over two lakh people engaged in cotton trading, spinning, ginning and harvesting activities in the state.

In Telangana too, the situation is similar. Traders are offering farmers sops now to get them to sell their cotton and accept cheques — trips to Mumbai, Shirdi and Tirupati are being offered. “If we deposit the cheques in the banks, the bankers will adjust it against loans and interest and the government will not reimburse it,” said Muthyala Reddy of Warangal.

“Cotton trade is always cash and carry activity and bank operations are hardly 10-15 percent. If we offer to pay online or through cards, our suppliers of seeds and fertilises will just reject,” says a cotton farmer, K Samaiah at Enumamula market yard in Warangal. “The ceiling on withdrawals had also made us delay payments. The government cap on withdrawal at Rs 24,000 per week has sandwiched the farmers,” says Phani Raj, a cotton trader at Chilakaluripeta.

Continuing trouble for cotton

The cotton crisis since 2014 in Telangana and Andhra Pradesh had led farmers to shift to other crops due to delay in institutional credit and an unending wait for farm loan waivers. The total area under cotton declined by 12 percent to 10.5 million hectares this year against 11.88 million hectares in 2015-16.

In 2015 and in early 2016 the crop was hit by the white fly and pink bollworm leading to 30 percent drop in yields. “We are asking the farmers not to use non-Bt cotton seed as refuge crop and reduce area under cotton,” says K Dhananjaya Reddy, commissioner for agriculture (Andhra Pradesh).

First Published On : Dec 26, 2016 15:21 IST

Demonetisation: Customers in spot as banks say no to deposits above Rs 5,000 despite finmin directive

Finance minister Arun Jaitley’s clarification on Monday late night that banks will take more than Rs 5,000 deposits from customers without questioning if the amount is deposited in one go seems to have fallen flat as bankers are refusing to take such deposits without a written declaration, say various news reports.

According to a report in The Times of India, bankers are following the Reserve Bank of India’s notification issued on Monday in letter and spirit which has given rise to the difficult situation.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

The RBI and the finance ministry on Monday morning put out notifications saying customers will be allowed to deposit old Rs 500 and Rs 1,000 notes worth more than Rs 5,000 only once before 30 December. Even then, they will have to satisfactorily explain to two bank officials why the deposits were not done earlier.

“Tenders of SBNs (specified bank notes) in excess of Rs 5,000 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. An appropriate flag also should be raised in CBS to that effect so that no more tenders are allowed,” said the RBI’s notification.

The move, according to the ministry, was aimed at reducing the queues in front of the banks. However, two other unsaid reasons could be fear of money laundering through unsuspecting poor customers and also curbing the accrual of deposits at the banks which have already gone beyond expectations.

However, the directive came under criticism as customers felt the government has deviated from its promise made by Prime Minister Narendra Modi on 8 November that nobody needs to rush to the banks to deposit their cash as there is time until 30 December. After the backlash, the finance minister late night on Monday clarified that customers will be allowed to deposit any amount of old notes if it is done in one go. The clarification just compounded the confusion as it completely contradicted the RBI’s early morning notification.

It is to be noted that there has not been any notification yet on the clarification, which essentially remains a verbal communication to the media from Jaitley.

The bank staff are at the receiving end of the repeated policy flip-flops. A top bank official has told The Times of India that a memo based on the RBI notification has already been sent to the staff. That is the reason they are not ready to accept the deposit without questioning by two officials.

The new notification – 59th after demonetisation was announced on 8 November, according to The Indian Express – is likely to further worsen the relationship between the bank staff and customers. While front office staff are bound to follow the orders received from the RBI, customers on the other hand are going by the finance minister’s notification, prompting an increase in abuses on the banking staff.

What has compounded the situation is the clause that customers have to explain the reason for the delayed deposit to the satisfaction of the questioning bank officials. ‘Satisfaction’ is a subjective term, some of them pointed out to the ToI. What is satisfactory for customer may not be so for the officials. There can be difference between the two officials too.

As author and columnist Vivek Kaul says in his Facebook post, bank staff or officers can’t be blamed. They are neither experts in questioning nor in finding the source of funds.

The bank unions have many times earlier brought to the attention of the authorities the problems faced by the staff. In a letter to the finance minister and the RBI, they had said the central bank’s repeated reiteration that it is dispensing enough cash to the banks is aggravating the situation at the bank branches as customers feel the staff is hoarding the cash to serve the rich and wealthy and that the poor customers are being shortchanged.

Clearly, the new notification is only adding to pain of the customers and banks.

First Published On : Dec 21, 2016 10:23 IST

Jaitley says deposit any amount of banned notes in one go, escape queries; confusion compounds

New Delhi – After tightening rules for depositing old Rs 500 and Rs 1,000 notes, finance minister Arun Jaitley on Monday night said no questions will be asked if any amount of junked currency is deposited in one go but repeated deposits may raise queries.

This is in clear contradiction to the Reserve Bank of India notification in the morning, which said customers depositing more than Rs 5,000 will have to satisfactorily explain why they did not do so early on, even if it is just once.

With nearly Rs 13 lakh crore out of the Rs 15.4 lakh crore worth of Rs 500 and Rs 1,000 junked already deposited in banks, the government has changed rules to mandate that individuals can deposit over Rs 5,000 in old currency bills only once until December 30 and that too after explaining why it had not been done so far.

Finance Minister Arun Jaitley. PTI file photoFinance Minister Arun Jaitley. PTI file photo

Finance Minister Arun Jaitley. PTI file photo

Explaining the rationale behind the move, Jaitley said all exemptions to certain sectors and utilities, which had been allowed to accept the banned currency post demonetisation, ended last week and all those in possession of the old notes are supposed to deposit them with banks.

“Anyone who has old currency notes is not allowed to trade in them. He can only go and deposit them with banks,” he said.

With a view to curtail queues at banks, holders are encouraged to deposit the entire holding in one go, rather than going repeatedly.

“If they go and deposit with bank any amount of currency no questions are going to be asked to them and therefore the Rs 5,000 limit does not apply to them if they go and deposit it once.

“But if they are going to go everyday and deposit some currency, same person, that gives rise to suspicion that where is he acquiring this currency from. In that event a person may have something to worry about. Therefore everyone is advised whatever old currency you have please go and deposit it now,” he said.

However, the morning notification from the RBI had said that the those customers depositing more than Rs 5,000 will have to face the questioning by the bank officials.

“Tenders of SBNs in excess of Rs 5,000 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. An appropriate flag also should be raised in CBS to that effect so that no more tenders are allowed,” the RBI notification said.

The latest statement by the finance minister will only add to the confusion of customers of the worried customers, who have already started queuing up in front of the banks to deposit their old notes. Many of them could have waited patiently for the rush at banks to decline to deposit their cash as the government had time and again promised that the deadline for depositing any amount is 30 December.

However, Jaitley justified the move to restrict the deposits saying there is no scope now for earning any old currency because all exemptions have been waived and it makes sense to go deposit all the holding in one go, Jaitley said. “This is the objective of the order passed today (on Monday).”

After banning old Rs 500 and Rs 1,000 notes on 8 November, the government had allowed all of the cash holdings with any person to be deposited in bank accounts till 30 December. There was no limit on the quantity or value of the junked notes that could be deposited.

However, the government on 17 December issued a gazette notification putting restrictions on deposits henceforth.

“The deposits of old notes of Rs 500 and Rs 1,000 denominations have been reviewed by the government from time to time. Already more than five weeks have elapsed since the time of the announcement of the cancellation of the legal tender character of these notes. It is expected that, by now, most of the people would have deposited such old notes in their possession,” an official statement said.

With a view to “reduce the queues in the banks”, the government said it has now been decided that “amounts exceeding Rs 5,000 in old notes can be deposited only once between now and December 30, 2016.”

“The banks have been advised to conduct due diligence regarding the reasons for not depositing these notes earlier,” the statement said.

Amounts of Rs 5,000 or less may continue to be deposited with banks in the customers account, as at present.

“However, cumulative deposits exceeding Rs 5,000 between December 19 and December 30, 2016 will be as per the procedures advised by the RBI in respect of deposits exceeding Rs 5,000,” it said.

The Reserve Bank of India (RBI) too came out with deposit guideline stipulating that restrictive conditions will also apply on the cumulative deposit of such notes in a single account when it exceeds Rs 5,000.

However, the defunct currency up to any amount can be deposited under the new black money amnesty scheme, PMGKY.

First Published On : Dec 20, 2016 08:32 IST

Demonetisation: RBI curbs deposits above Rs 5,000; what happens to Modi’s promise now?

On the 41st day of Prime Minister Narendra Modi’s 50-day promise to get back normalcy in common man’s life post 8 November demonetisation announcement, yet another promise is broken made to the common man.

A customer waits to deposit 1000 Indian rupee banknotes in a cash deposit machine at bank in MumbaiA customer waits to deposit 1000 Indian rupee banknotes in a cash deposit machine at bank in MumbaiThe Reserve Bank of India (RBI), in a press release said in the remaining days of this month, one can make a deposits in Rs 500 and Rs 1,000 notes in excess of Rs 5,000 only once per account.

If you want to deposit cash in banned currency in excess of that amount, you’ll have to explain in the presence of at least two officers on why you could not do it earlier. Even if the deposits are made in small amounts multiple times, if they add up to the magic number of Rs 5,000, again you stand exposed to questions.

One wonders what happened to PM Modi’s promise (read the full text of PM Modi’s 8 November speech here) to the nation that, “Persons holding old notes of 500 or 1,000 rupees can deposit these notes in their bank or post office accounts from 10th November till close of banking hours on 30th December 2016 without any limit. Thus you will have 50 days to deposit your notes and there is no need for panic. Your money will remain yours. You need have no worry on this point.”

The RBI circular is also silent on why should an honest citizen need to answer a banker on the timing of his deposit and the amount? A banker, after all, is not an investigator. Or is the assumption here that anyone who hasn’t deposited invalidated currencies in their bank accounts are hoarders of black money?

Repeated flip-flops in withdrawal/exchange rules since 8 November makes one wonder what is the nature of the plan both the RBI and the government claims to have for the ‘well-thought out’ rollout of currency ban. It reminds one the statement of former Prime Minister Manmohan Singh’s caution to the RBI, an institution he headed once, about the trust deficit the central bank is facing with the way it dealt with the demonetisation from the very beginning.

“It is no good that everyday the banking system comes with modification of the rules, the conditions under which the people can withdraw money. That reflects very poorly on the Prime Minister’s office, on the finance minister’s office and on the Reserve Bank of India. I am very sorry that the Reserve Bank of India has been exposed to this sort of criticism which I think is fully justified.” The ardent fans of frequent rule flip-flops in government and the RBI would do well reading history and find the story of a former Delhi sultan, Muhammad bin Tughluq.

What do the government and the RBI achieve by breaking their promise by restricting deposits before the 30 December deadline? One possibility is that the government doesn’t want a likelihood of all money demonetised returning to the bank counters. At the last count, almost Rs 13 lakh crore of the Rs 15.4 lakh crore demonetised currency notes had found their way back to the bank counters. If all the Rs 15.4 lakh crore returns, it will be an egg on the face of the government, which probably expected a good part of the unaccounted wealth to get destroyed. This would have helped it to say that much illegal cash is destroyed in the exercise. Earlier, the government was expecting only around Rs 10 lakh crore to return, but the public surprised the government by depositing money diligently.

If the action is to target hoarders, it is unlikely that the government finds any luck with this latest flip-flop. The tax evaders would have deposited their money much earlier in small doses either by creating fake accounts (like in the Axis Bank episode), donating to one of the 1866 political parties that enjoy no tax, no scrutiny under the current laws, by splitting the amount to several small bundles or depositing it multiple benami accounts.

Thus, the likely victims of this latest U-turn will be the common man, some of whom would have waited for the queues in banks to get short to deposit their old currency savings. If they have a large amount to deposit, they should get ready to face questions at bank counter to establish that this is their own money. Last month, the government had abruptly stopped the currency exchange facility at bank counters after initially promising until 30 December. Remember, a number of time rules have changed for the common citizens on cash withdrawals and deposits. Bankers, at one point, even inked customers to ensure people don’t withdraw cash beyond certain specific limits, reminding one of war-time rationing.

Demonetisation story is taking new turns rapidly with changing goal posts and theories of as yet uncertain gains in the long term. But, no matter what the final gains of the demonetisation are, both the RBI and the government will have to answer the common man on the repeated breach of promises while executing a ‘well planned operation’ and fight a growing trust deficit that’ll also have likely political implications.

First Published On : Dec 19, 2016 15:38 IST

Demonetisation: Cashlessness sting still painful on day 41

New Delhi: There was no respite in sight for cash-strapped people on Monday as queues outside banks and ATMs for withdrawing money continued across the city with rising anger and pain.

Representational image. PTIRepresentational image. PTI

Representational image. PTI

An IANS correspondent who visited about 10 banks and ATMs across the city, found over 150 people outside Punjab National Bank and State Bank of India in Kalkaji area of south Delhi.

Similar conditions were witnessed outside the Indian Overseas Bank, ICICI Bank and Axis Bank in Preet Vihar area in east Delhi.

Jaswant Sharma, a security guard with a law firm and resident of Kalkaji extension, told IANS: “Since the day I got my salary I am looking for an ATM to withdraw some cash. Three of my attempts have gone in vein as the ATM machine runs out of cash before my turn comes.

Asked if he supports the government’s move of scrapping the old Rs 500 and 1,000 notes, Sharma said: “I have nothing to do with the government decision, I just want to withdraw some cash as I am left with only Rs 10 in my pocket. Cash is the necessity.”

“I have borrowed the bicycle from one of my friend to reach here,” he rued.

There were around 300 people outside the Yes Bank and HDFC ATM kiosk in Kalkaji area around 12.30 a.m. which was dispensing cash till early morning.

Balkishan, a lawyer who had arrived at the ATM to withdraw cash with his 12-year-old son, told IANS: “At most of the places people in the queues do not allow withdrawal from multiple cards. So I have come with my son to withdraw money from two cards.”

“We cannot stand in bank or ATM queue everyday, what comes in mere Rs 2,500,” he asked.

However, similar situation was witnessed outside the banks on Monday morning, which opened after Sunday. Hundreds of people were seen waiting for their turn.

Balwinder Singh, a resident of South Extension Part II who was standing outside Punjab National Bank in south Delhi, told IANS: “It is completely mismanaged show.”

“The government has made the middle and working class people suffer. Today I have skipped my office for the third time since demonetisation to withdraw cash.”

“Is government going to pay me for the days I have skipped my office to withdraw some cash?” he said.

Echoing similar opinion, Neha Sharma, an IT professional working with an MNC in Noida, said: “We cannot skip office everytime by giving the excuse that we need to withdraw some cash.”

“The government has set the limit of Rs 24,000 a week, but the bank officials are only giving Rs 4,000,” she rued.

“How do we manage our expenses for whole month in just Rs 4,000,” she asked.

Serpentine queues have been witnessed across the country after the government’s November 8 decision to spike higher currency notes to curb “black money and corruption”.

First Published On : Dec 19, 2016 12:32 IST

Demonetisation is good, for many reasons: Surat CA’s video explaining velocity of money goes viral

A chartered accountant from Surat, who penned an open letter to Delhi Chief Minister Arvind Kejriwal explaining Prime Minister Narendra Modi‘s demonetisation move using two imaginary, but interesting scenarios, is back with another video on note ban.

Mehul Shah in the video, produced by Tax Origin, explains how the decision to demonetise will increase ‘velocity of money’. Velocity of money denotes the number of times a unit of money in an economy changes hands during a certain period. Shah says that cash is not supposed to be hoarded because it is not a commodity, instead, cash is meant to be used as a “medium of exchange” for goods and services to be received. “A single note of Rs 1,000 is worth Rs 10,00,000 if it passes through 1,000 citizens across the country in a year and is worth only Rs 1,000 if it is kept idle in a locker. This is called the velocity of money.”

Asserting that demonetisation will increase veloctiy of money, Shah adds a rider.

“It is true that the economy may surely be benefited if the velocity of money increases and theoretically the move of demonetization and move towards cashless economy should help to increase the Velocity of Money but it cannot be proved with certainty because we never knew the velocity of money in parallel economy because those transactions were never captured in accounts or public records.”

The video strictly advises people not to sell notes at discounted prices or deposit cash into benaami accounts in fear of penalty. Shah further tells not to claim any bogus expenses or bogus loss to gain more trouble. “Do not manipulate accounts by creating bogus cash on hand. Be sporty and pay tax honestly to buy peace of building capital.”

Even though Shah’s blog is ridden with jargons, the video will help you understand the concept and benefits of a cashless economy better. If we had to cut through the jargon and explain the concept in a gist, it would be this:

Since cash leaves no trails and it is hard to pinpoint black money hoarders in a parallel economy, a cashless economy is probably the best way to cut through all the corruption.

“…the task of the Government as well as citizens is not going to be easy because as I said earlier, Cash leaves no trails. Hence it is in the interest of the Government as well as we common man to adopt to cashless means of doing business and encourage everyone to use banking route as much as possible.”

First Published On : Dec 17, 2016 16:28 IST

Demonetisation: Delhi Police recovers Rs 3.25 crore in old notes from hotel raid

New Delhi: Delhi Police raided a hotel in Karol Bagh here and recovered Rs 3.25 crore in demonetised notes from five persons, police said on Wednesday.

Based on secret information, the Crime Branch conducted a joint raid with Income Tax officials late last night at Taksh Inn in Karol Bagh and found five persons in two rooms of the hotel carrying a total amount of Rs 3.25 crore, said Ravindra Yadav, Joint Commissioner of Police (Crime).

Representational image. PTI

The five men are carriers and have been identified as Ansari Abuzar, Fazal Khan, Ansari Affan, Ladu Ram and Mahaveer Singh, he said. The recovered amount was kept in different suitcases and cardboard box.

It was found during interrogation that the money belongs to some Mumbai-based hawala operators, said the officer.

“They had hired packaging specialists who pack these notes in such a manner that they are even undetectable by airport scanning machines. Experts in packaging are using some tapes and wires which pass through X-ray,” he said.

The Income Tax department has seized the cash and is analysing the mobile phone details of these people since their phones contain details of lot of other hawala operators, he added.

First Published On : Dec 14, 2016 11:24 IST

In the time of demonetisation, it is the small change that comes to the rescue

The Income Tax Department may not tax, penalise or even frown at much of the hoarded money that is coming out — the small change — the coins of Re 1, Rs 2, 5, and 10. They are being taken out of that corner drawer or the kid’s piggybank after replenishing it with a crisp Rs 2,000 bank note.

“Look, how nice it looks. Pink and not a crease or an ink spot. Now, there is more room for coins,” is usually the explanation given to the suspicious child. After a pause, comes the qualifier: “Later”. Heaven knows when that “later” would arrive.

It was both scarce and plentiful. Even at the counter of the supermarket, which does 12 hours of brisk business, you proffered a note, including the denominated notes of Rs 500 and Rs 1,000, and the cashier would say,  “Change, sir?”

Representational image. Reuters.

Representational image. Reuters.

You insist and they would bring out the coins and give you the change. Like you and every other shopkeeper, they too hoarded, because of two reasons. The shopkeepers bought them at a commission, Rs 15 for every Rs 100 from moneychangers who include beggars. You did not carry them around because they weighed down your pocket.

Now they are back in respect.

The other day, my bank gave me Rs 1,000 in coins, as many as 100 of the shiny Rs 10 in a nicely sealed plastic bag. The wife grabbed it as anything other than Rs 2,000 bank note was welcome. Because, between Rs 100 and the Rs 2,000 currency notes, there isn’t any currency-stifling transactions.

There was a time you liked crisp bank notes, but seldom got any, be it from the bank where a cheque was encashed or across the counter from a shop or a superstore. You settled for whatever was provided, even the most battered notes.

There was also preference for higher denomination notes of Rs 100 and 500, and even Rs 1,000. Since Rs 10 fetched very little, it did not count for much and a Rs 50 note was just alright. So was the denomination of Rs 20. The idea was not to physically fatten the wallet.

Wallets have to be fat by virtue of its value, not grammage. When we spend for thinner, lighter mobile phones, never mind its length and breadth, but consider the thinness a desired quality, thick wallets are passé.

Who wanted the coins! It lasted a journey back home to rest in a small pile, and if you had a grandchild, into his or her piggybank. Even beggars frowned at the Re 1, Rs 2, and didn’t mind the Rs 5 coins, and the Rs 10 isn’t as much in circulation. Even the beggar suffers the weight of inflation and the ignominy of having to stretch a palm.

The coins were after all chillar. It has its demeaning nuance.

Post-denomination, most of us came close to stretching our palms after waiting in the queue without instigating a riot for the cash crunch. If the banks didn’t readily part with your money to you, how would a neighbour?

The days of the small loan are over. At least in the short term. It is for the Reserve Bank of India to determine what that ‘short term’ means. You have lost control of your money, so why not let the central bank decide on the timeline? Anyhow, you have the other time on mind – the time you would need to spend in a queue outside an ATM which disgorges only the Rs 2,000 note.

Disgorge is not mot juste here. It only reluctantly tosses out one.

The curious aspect of queues outside ATMs is where the machine is stocked with Rs 100 notes. The attempt is to draw Rs 1,900 and Rs 2,000. That big-daddy bank note is money you cannot use much. It is a limited attempt at gaming the system.

First Published On : Dec 13, 2016 14:28 IST

PM Narendra Modi slams Opposition for stalling Parliament over demonetisation

Bahraich: Expressing concern over virtual washout of the Winter Session of Parliament amid continued Opposition protest on demonetisation, Prime Minister Narendra Modi on Sunday said parties “discarded” by the people have stalled proceedings in both the Houses.

“Parliament has not been allowed to function for 20 days. We are ready for a debate on demonetisation but we are not being allowed to present our view point by those very parties that have been discarded by the electorate,” he said.

Prime Minister Narendra Modi. File photo. AFP

Prime Minister Narendra Modi. File photo. AFP

Modi was addressing BJP’s Parivartan Yatra through mobile phone from Lucknow after the IAF chopper carrying him failed to land in Bahraich due to poor visibility. “They (Opposition) come to the Well of the House…throw paper at the Speaker. We want to put forth the government’s view point…but they are not allowing us to do so,” he said.

On demonetisation, he said, “You must have seen that the government is after people who have stashed black money. The government is committed to empowering the poor. The people are also taking pain to ensure the country moves on the path of development.”

Attacking Samajwadi Party and Bahujan Samaj Party, Modi said both the parties are talking in the “same tone”. He said both the parties are facing “hardship” due to note ban.

Modi said only BJP could fulfill aspirations of the people of Uttar Pradesh and appealed to the electorate in Awadh region to vote for the party in the coming Assembly polls in the state.

“For Uttar Pradesh to progress, poverty and goonda raj need to be removed,” he said.

“Police are also helping those who are indulging in hooliganism. We have to crush those patronising goondagardi (hooliganism). The BJP will fulfill aspirations of the people of the state,” he said.

Asking people to learn to use mobile banking, Modi said, “I am addressing you through mobile. You can turn your mobile into your bank. You have to learn it slowly.”

Modi was national general secretary of BJP when he visited Bahraich in 2001 for the first time, and later in November 2013 for the second time. This was BJP’s 5th Parivartan Yatra to be addressed by the prime minister in the state.

Modi has earlier addressed four parivartan rallies at Ghazipur, Agra, Kushinagar and Moradabad. His next rally is scheduled to be held in Kanpur on 19 December.

State BJP President Keshav Prasad Maurya said, “The prime minister will try to come again to Bahraich when his schedule and weather allow.”

First Published On : Dec 11, 2016 16:58 IST

Demonetisation has embassies unhappy; Modi government must take stock of diplomats’ woes

Prime Minister Narendra Modi announced on 8 November that his government has rendered Rs 500 and Rs 1,000 notes as illegal, citing the drive as an effective solution for an economy riddled with black money, counterfeit currency, and to counter terrorism. Many didn’t know what to make of it, some called it a “masterstroke”, others a “foolish idea”. As the days pass on his 50-day waiting period, and economists, policy watchers have had time to reflect on the demonetisation move, the side-effects are becoming more apparent.

How will demonetisation affect foreign policy?

A recent PTI report claimed that the demonetisation move is taking a toll on Indian diplomacy because Russia lodged a “strong protest over cash shortage affecting the functioning of its embassy in Delhi and threatening retaliatory action.”

Representational image. PTIRepresentational image. PTI

Representational image. PTI

Before we give into theatrical imaginations, a “retaliatory action” would be that the issue will be escalated to Moscow and the Indian ambassador in Russia will be called in. What seems to be the issue, you ask? There has been a restriction on withdrawal imposed on embassies for about Rs 50,000 per week. Russian ambassador Alexander Kadakin wrote to the Ministry of External Affairs that such an amount “totally inadequate as regards (to) the embassy’s salary and operational expenditure requirements.”

The official quoted in the PTI report also suggested that other retaliatory options would include putting a similar restriction on cash withdrawals for Indian diplomats posted in Russia.

Russia, however, is not the only country expressing its frustration with demonetisation — not so much with the move, but with the withdrawal restrictions.

According to The Times of India, Hans Dannenberg Castellanos from the Dominican Republic, ambassadors of Pakistan, Sri Lanka and Ethiopia have also sent letters to the MEA.

“The worst hit are Nepal and Bhutan where Indian currency is a legal tender,” says the report. The disgruntled diplomat group, led by Russia is hoping for increased ceiling for withdrawals, dedicated bank windows in bank branches and removal of cash curbs for foreign visitors.

The government, according to a report in Business Standard, has set up an “inter-ministerial task force” to ease the problems of diplomats.

Now, the most obvious impact that one can ascertain from the way things are going is that this hurts the goodwill between nations, at a very individual level.

The Narendra Modi government has maintained the necessary optics in terms of foreign policy and diplomacy. As argued in this Firstpost piece, foreign policy has been the most visible dimension of this government’s term so far. But the government’s negligence in taking care of the growing dissatisfaction and negative impact of demonetisation on embassies and for diplomats will mar the good reputation that India has built so far.

The BJP government has prided itself on turning the focus of its international efforts towards India’s neighbours — the “neighbourhood first policy” might get off course as countries like Myanmar, Bangladesh, Bhutan, Sri Lanka and Nepal — where the Indian rupee is a legal tender and use of which is actually encouraged.

Handshakes, press conferences, signed MoUs, photo-ops are all great, but if the people working behind the scenes — foreign bureaucrats, diplomats and embassy workers — are unhappy, the shiniest jewel in the BJP crown could lose some of its sparkle.

First Published On : Dec 8, 2016 12:04 IST

Demonetisation: Why it’s not a bad idea to bring old Rs 500 note out of retirement

While announcing its monetary policy on Wednesday, the Reserve Bank of India gave clear indications that the situation is fluid because of withdrawal of certain currency notes from the market.

“In the view of the Committee, this bi-monthly review is set against the backdrop of heightened uncertainty… In India, while supply disruptions in the backwash of currency replacement may drag down growth this year, it is important to analyse more information and experience before judging their full effects and their persistence — short-term developments that influence the outlook disproportionately warrant caution with respect to setting the monetary policy stance,” the central bank said.

Representational image. Reuters

Representational image. Reuters

In its statement, the RBI pointed out that currency in circulation plunged by “Rs 7.4 trillion up to December 2…” and this led to a fall in demand, supply and production.

So, clearly, there is a cash crunch. And there could be just one solution to ensure that the economy does not suffer for too long: supply of more cash in the market.

How about this for a solution: since most of the currency in circulation is already in the banks — and not lying buried under pillows or being thrown into the Ganges — why not introduce the old Rs 500 currency notes back into the market, make them legitimate tender again?

One of the reasons behind the withdrawal of the notes of higher denominations was that it was expected that a large amount of cash would not return to the system. But, as several reports have pointed out, most of the nearly Rs 14.5 lakh crore of the demonetised money that was in circulation will soon be deposited in banks.

Experts would continue to debate the gains from demonetisation for a long time. Some would argue that it has failed because people found a way to bring money back into the system, denying the RBI a windfall through extinguished currency. Others would claim that since the money has come back into the system, it can be taxed and used by banks for cheaper loans. But the gains through enforcement of tax laws, experts contend, could be slow and may not be able to offset the disruptive cost of demonetisation, leading to a net loss to the economy.

But, what is clear by now is that the currency notes, especially the Rs 500 notes, can be easily used after withdrawal from banks once the full currency in circulation gets deposited; there is very little left in the market. It can be safely deployed to cover the shortfall in supply. This will serve two purposes: one, immediately improve liquidity; two, minimise government cost on printing and distribution of new notes.

In fact, given that almost all the notes have now reached the banks, even the Rs 1,000 notes could have been put back into circulation. But, since they have already been supplanted by Rs 2,000 notes, their absence won’t hurt the system much.

Also, it is clear that fears of counterfeit currency flooding the Indian market were a bit exaggerated. Different estimates put the value of counterfeit notes to just around Rs 400 million, which is just a fraction of the currency in circulation. So, reintroducing old Rs 500 notes, especially when they would now be filtered through banks, would not hurt the Indian economy.

Several banks, including the State Bank of India (SBI), have been complaining that the increase in deposits would hurt them unless there is adequate compensation. And since the RBI has disallowed them from using the excess cash through a hike in Cash Reserve Ratio (CRR) — a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with RBI — banks are complaining that they would have to pay interest on these deposits without deploying them in the market for returns.

Obviously, if the curbs on withdrawals are lifted, banks too stand to gain.

Though pragmatic, the reintroduction of the old Rs 500 notes to address the cash crunch would, of course, be seen as a rollback. And, in the context of the heavily politicised debate around demonetisation, which is looking more and more like currency exchange now, the Narendra Modi government would see it as acceptance of failure of the demonetisation policy.

In the end, the notes would be pulped not because they have been rendered useless, but, because of the question all political parties fear: log kya kahenge (what will the people say?)

First Published On : Dec 8, 2016 09:40 IST

Demonetisation: How Narendra Modi changed the currency ban narrative

By Praveen Chakravarty

Prime Minister Narendra Modi addressed the nation on November 8, 2016 to announce the withdrawal of Rs 500 and Rs 1,000 notes.

The speech (in English) lasted 25 minutes. The Prime Minister uttered the phrase “black money” 18 times in this speech. He mentioned “fake currency” or “counterfeit” five times in the same speech.

Prime Minister Narendra Modi. AFP

Prime Minister Narendra Modi. AFP

It was unambiguously clear from the Prime Minister’s speech that the primary motivation for the sudden withdrawal of nearly 86% of the country’s currency was the evil of black money.

The next day, the papers termed it a “war on black money”. PayTM, a mobile payment app, hailed the decision with a full-page ad and the Prime Minister left for Japan.

By the time the Prime Minister returned from Japan, the move had been christened “demonetisation” in English, “notebandi” in Hindi and there was a war-time like rationing of currency in the country.

The Prime Minister made six speeches across the country on the demonetisation policy between November 13 and November 27, including his radio address to the nation, Mann Ki Baat, according to data available on the Prime Minister’s personal website. The text of all the speeches are available on the website.

A data analysis of the speeches (after translation) reveals a shifting of the narrative of the demonetisation action and its objectives.

In his speech on November 8, 2016, when he announced the demonetisation policy, the Prime Minister used the phrase “black money” four times more than “fake/counterfeit currency”.

By November 27, he used the phrase “digital/cashless” thrice as much as “black money” with no mention of “fake currency”. Recall, there was zero mention of “digital/cashless” in the initial November 8 speech.

The chart below shows the ratio of the three narratives–“black money”, “fake currency” and “cashless/digital pay”–in each of the Prime Minister’s speeches over three weeks and seven speeches.

In other words, in the same speech, how many times did the Prime Minister use each of these phrases to describe the reasons for demonetisation which can be used as a proxy to understand what the Prime Minister believes was the primary objective for this mammoth exercise.

The saffron line representing the “cashless/digital” phrase in the Prime Minister’s speeches went from 0 in the November 8 speech to a 73% ratio in the November 27 speech.

The green line representing the phrase “fake currency” went from 22% to 0 in the same period suggesting the Prime Minister no longer believes that terror financing was the primary or secondary driver of this demonetisation exercise.


The black line representing the phrase “black money” went from a high of a 80% ratio on November 8 to only 27% on November 27. Apparently, it is no longer a “war on black money” but instead a “war on all currency” to go cashless.

So, between November 8 and November 27, the objective for the demonetisation exercise has swung from black money elimination to going cashless, as evident in the Prime Minister’s speeches.

To be sure, urging citizens to use less cash and resort to digital transactions is a laudable objective and must certainly be encouraged. But when a decision was taken to remove a whopping 86% of the country’s currency overnight with all its attendant costs, one would have hoped there was one strong rationale for it, even if it meant achieving multiple objectives.

Either the Prime Minister has realised that the original primary objective of eliminating black money may not be met or there was not adequate thought behind the decision. Either way, it is worrisome.

(Chakravarty is Senior Fellow in Political Economy at IDFC Institute & Founding Trustee, IndiaSpend. Author thanks Puja Das of IndiaSpend for help with Hindi translation.)

( is a data-driven, public-interest journalism non-profit.)

First Published On : Dec 5, 2016 10:11 IST

Toll tax collection at Mumbai plazas resumes: Commuters hassled, vehicles caught in snarl-up

Mumbai: Long queues of vehicles at toll plazas, some several km-long, returned to haunt hassled commuters on Saturday as the collection of toll tax was resumed from 2 December midnight.

Caught in the traffic snarl, office-goers, students and passengers rushing to catch long-distance trains or flights here were delayed.

The serpentine queues of both big and small passenger and commercial vehicles were witnessed at all the five toll plazas at the entry and exit points to Mumbai, in the absence of smaller denomination notes and inadequate arrangements for cashless toll collection.

Most toll plazas refused to accept new Rs 2,000 notes, the maximum in circulation after demonetisation of old Rs 500 and Rs 1,000 on 8 November, as no notes of smaller denomination notes were not available. Many commuters refused to accept coupons in lieu.

The problem was compounded as toll plazas have been barred from accepting old Rs 500 and Rs 1,000 notes and the government said coupons would be issued to tide over the change crisis.

This led to bitter arguments between toll collection staff and vehicle owners, leading to further delays, longer queues and frayed tempers.

The worst situation was seen at Vashi and Dahisar toll plazas, besides other toll collection points on the Mumbai-Pune Expressway, the Mumbai-Ahmedabad, Mumbai-Agra, Mumbai-Nagpur and other toll roads.

Mumbai alone has five entry points at Dahisar, Mulund, Thane, Airoli and Vashi, managed by MEP Infrastructure Developers Ltd from where several thousands of vehicles enter or exit the metropolis.

Many local commuters complained that they were delayed by several hours in reaching their places of work. Some passengers griped they missed their flights or long-distance trains while students said they were delayed for classes as well as internal exams.

“I had an important meeting lined up at 11 a.m., but am waiting at the toll plaza for over two hours. Now, the meeting will have to be rescheduled,” said MNC executive M. Risha from Kandivali, who was driving to work in Thane.

Toll collection was waived for various periods extended from time to time since demonetisation, that is, from November 9-11, 11-14, 14-18, 18-24 and finally between November 24 and December 2 in view of shortage of new currency and change.

First Published On : Dec 3, 2016 17:10 IST

Note ban: Deadline to exchange old Rs 500, Rs 1,000 comes to a close, queues get longer at Mumbai pumps

Mumbai: As the new deadline allowing petrol pumps to accept scrapped high-denomination notes ends on Friday, long queues were witnessed at several fuel stations across the metropolis.

“Today is the last date for filling up fuel in your vehicle using old Rs 500 currency notes. I have come to get my motorcycle tank filled,” said Akshay Mudgal, who was in a queue outside a petrol pump in North Mumbai suburban Malad.

Besides the queues at petrol pumps, people had lined up outside the banks and ATMs also, with many waiting to deposit old notes and withdraw money. Thursday was the first salary day post-demonetisation and those who could not withdraw salary from banks queued up on Friday, struggling to withdraw cash for their monthly commitments. Many queues had senior citizens and pensioners. Also, non-functional and dried up ATMs worsened the situation prompting people to take to e-payments.

PTI image

Representational image. PTI

“With no end to the queues in sight any time soon, people have shifted to making certain payments online or by debit/credit cards,” Praful Gosavi, an accountant with a private firm, said. People have to make payments to private drivers, domestic helpers, baby-sitters, neighbourhood grocery shops, local barbers, the corner chaiwalla, roadside vada-pav and food vendors, casual labourers, vehicle washers and with reduced circulation of small currency, making such payments has become difficult, he said.

At the 150-year-old Mangaldas cloth market in South Mumbai, customers have dwindled in the last three weeks, a cloth merchant said. “Till 8 November, when Prime Minister Narendra Modi announced the ban, the market was bustling as usual but now there’s so much space that one can play cricket here,” he said.

In Crawford Market too, footfalls at various popular shops selling household items, bags, vegetable and fruits has reduced considerably, a shop owner said. Government has cut short the deadline of using old Rs 500 notes at petrol pumps and for buying airline tickets at airports till Friday instead of 15 December announced earlier.

With effect from Saturday, old Rs 500 notes cannot be used for purchase of petrol, diesel and gas at the stations operating under authorisation of public sector oil marketing companies and for buying airline tickets at airport counters, a government notification said.

However, old notes will continue to be accepted for other utility bill payments as well as at railway ticketing counters and counters of government or public sector undertaking buses for purchase of bus tickets till 15 December.

First Published On : Dec 2, 2016 18:17 IST

Demonetisation to have long-term benefits; disruption temporary: Finance Minister Arun Jaitley

New Delhi: Conceding that demonetisation may create a disruption in short-term, Finance Minister Arun Jaitley on Friday said the impact on the economy may be seen “for a quarter or so” but relative advantages are going to be much more in the long run.

“When you switch over, it creates disruption. I don’t see disruption lasting too long. You may see the impact for a quarter or so. Then when you look at next 12-15 quarters, it’s certainly going to benefit,” he said at the HT Leadership Summit in New Delhi.

Citing a few economic trends post demonetisation, the Minister said rabi sowing this season has been higher than last year, while auto sales were a mixed bag.

A file image of Finance Minister Arun Jaitley. PTI

A file image of Finance Minister Arun Jaitley. PTI

“Of course, you will have some disruption created because of the switchover, in the long run, advantages are going to be huge as far as the relative cost of disruption is concerned,”
Jaitley said.

He further said the Indian economy has been witnessing a high growth in the past two years and retained the tag of the fastest growing large economy in the world. This year too, India would probably remain the fastest growing economy, the Finance Minister added.

On GST, Jaitley said, its implementation cannot be delayed beyond 17 September next year due to constitutional compulsion.

“First of all, the constitution does not permit a delay in GST implementation. The notified GST on 16 September and the constitutional amendment itself says that the current indirect tax system can continue for one year, after which the GST has to come,” he said.

“So, if on 16 September, 2017, there is no GST, then there is no taxation in the country. So, you have a constitutional compulsion to have a Goods and Services Tax in place before September 16; otherwise, the country doesn’t run, and the tax is absolutely essential,” the FM added.

The government intends to implement the GST from 1 April, 2017, Jaitley said.

Jaitley further said that low-cost deposit due to demonetisation will increase and therefore the ability of banks to use that money suddenly improves for reasonable cost lending in various sectors like social, infrastructure, industry and trade.

“So, that boosts the economy. There could be another limb, that money which was not deposited, then goes to the credit of the RBI. And that money can be constructively used.

And of course the third limb, the immediate advantage that you will have of this money, that are even being deposited and which are liable for exemplary taxation,” he said. And the fourth limb, he said, base of taxation for

And the fourth limb, he said, the base of taxation for direct and indirect would expand. Noting that security printing of currency is a fairly complicated and time-consuming exercise, the Finance Minister said, replacement of large volumes of currency required calibrated move by the RBI otherwise it would lead to malpractices.

“If you suddenly release entire thing in one go then there would be market malpractices and therefore remonetisation process is not instantaneous but it would be spread over a couple of weeks,” he said.

Acknowledging that long queues were factored in during the decision-making process of demonetisation, the finance minister appreciated that people have cooperated immensely and
those standing in queues were disciplined.

“The country, by and large, has welcomed this decision,” he said, adding there will be a very significant amount of currency that will be released into the market by 30 December.

“One of the significant advantages of this would be you won’t have the same level of currency which existed on 8 November… the level of paper currency will shrink, you should not expect the same level of paper currency coming back and it would be lesser. The balance would be replaced by other modes credit, debit cards, e-wallets,” the FM said.

Emphasising that people are already moving towards digital transactions, he said out of 80 crore credit and debit cards, 45 crore cards are in active circulation.

Besides, there are 23 crore e-wallets that started less than one-and-a-half years ago, he added.

“Both in politics and media, you find difficult to digest these figures but the country is changing much faster than what we think,” Jaitley said.

First Published On : Dec 2, 2016 17:01 IST

Demonetisation: Manufacturing activity cools in November on cash crunch, shows PMI

Indian factory activity decelerated sharply last month after Prime Minister Narendra Modi‘s currency crackdown led to a rationing of cash and cooled domestic consumption, new orders and production.

The Nikkei/Markit Manufacturing Purchasing Managers’ Index fell to 52.3 in November from October’s 54.4, its biggest month-on-month decline since March 2013.

However, it held above the 50 mark that denotes growth for the eleventh straight month.



“PMI data for November showed that the sudden withdrawal of high-value banknotes in India caused problems for manufacturers, as cash shortages hampered growth of new work, buying activity and production,” said Pollyanna De Lima, economist at survey compiler IHS Markit.

The new orders sub index that measures both foreign and domestic demand was knocked down to 53.3 from 57.7 in October, the largest monthly fall in over 4-1/2 years.

Modi’s decision last month to scrap Rs 500 and Rs 1,000 banknotes as part of a crackdown on tax dodgers and counterfeiters removed 86 percent of the currency in circulation virtually overnight.

That left banks flush with cash but knocked consumption and investment and led to markets calling for aggressive rate cuts from the RBI to support demand.

Slowing demand in the world’s fastest growing major economy could undermine growth in coming quarters especially as factories have already started cutting output.

India’s $2 trillion economy picked up pace between July to September compared to the previous three months, growing 7.3 percent against expectations of 7.5 percent expansion in a Reuters poll, official data showed on Wednesday.

But cooling price pressures, as reflected in the latest PMI where both input and output price rises decelerated, may act as a temporary relief and provide room for the Reserve Bank of India to cut interest rates further.

“Of respite to firms, cost inflationary pressures softened, which in turn encouraged the vast majority of businesses to keep their selling prices unchanged. If this trend is sustained we will likely see further cuts to the benchmark rate,” De Lima said.

Indian consumer inflation eased for a third straight month in October to 4.2 percent, helped by smaller rises in food prices.

First Published On : Dec 1, 2016 11:44 IST

Demonetisation: Cash crunch unlikely to end soon; PM Modi’s 50-day promise may fail

“For us, 33000 ATMs are currently dispensing cash. More will come up as day proceeds. You need to talk to RBI (Sic),” said SBI chairman, Arundhati Bhattacharya on Wednesday, when asked how long the cash-shortage will last in ATMs and how well the banking system is ready to face the week when salaries get credited to employee accounts and people rush to ATMs/ branches to draw money.

A file image of people standing at an ATM queue. ReutersA file image of people standing at an ATM queue. Reuters

A file image of people standing at an ATM queue. Reuters

Presently, SBI has about 49,000 ATMs. If 33,000 ATMs are dispensing money, that means about 67 percent of the ATMs of the country’s largest lender (by assets) are dispensing money. Let’s assume that rest of the banks too have managed to fill in cash in at least 50-60 percent of their teller machines. Things must have improved. But, then you can’t fool your eyes. A good number of the 2 lakh ATMs in the banking system continue to remain cash-starved even after three weeks of demonetisation announced by Prime Minister Narendra Modi and there are still stories of pain in daily lives.

Even after 21 days, there are still no visible signs of pain easing significantly, especially in rural areas if one goes by reports (read here, here, here and here)

The problem of Rs 500 notes

Both the Reserve Bank of India (RBI) and the government have been assuring the public that there is enough cash in the banking system and there is no need to panic. Then why do we still see continuing cash shortage on the ground?

The reason is simple. There isn’t enough lower denomination notes (Rs 500 and below) to go around. The government mints have been aggressively printing Rs 2,000 notes, whereas the printing of Rs 500 notes, which is more handy to the common man for daily transactions, is a scarce item. Bhattacharya too attributed to the continuing cash crunch to the shortage of Rs 500 notes.

“The current availability is more of higher denomination notes. People want lower denomination notes, especially Rs 500. It takes time to change printing queues. Initially printing was concentrated on Rs 2,000 so as to provide bulk,” Bhattacharya said.

How long more should it take before banking system gets enough Rs 500 notes? “Talk to RBI,” Bhattacharya replied. The RBI has not provided any details about the printing of Rs 500 notes. A detailed questionnaire sent to the spokesperson of the central bank on the details of cash shortage remained answered till the time of writing this copy.

The 50-day promise

On 13 November, PM Modi had sought 50 days from the public to tide over the hardships post the demonetisation. But, can the PM keep his promise? At this stage, it looks doubtful. Most bankers, economists and financial sector experts said that the cash crunch could last at least until March (three more months beyond what the PM sought) for things to return to normal. A recent report in the Quint, says that the printing of the new Rs 500 note has come to a near-halt at the government’s Nashik and Dewas mints.

The report, which quoted RBI sources, attributes a series of errors on the new Rs 500 notes and the low printing capacity of Nashik and Dewas presses as the reason that promoted the RBI and the government to call off printing of Rs 500 notes. Firstpost hasn’t verified this information independently. But, if indeed this report is true, we are looking at even more delay for the Rs 500 notes coming in sufficient numbers to the rescue of common man. But one need to wait and watch how the scenario unfolds.

“The situation is pretty bad. It shall take 5-6 six months before we reach normalcy,” former RBI deputy governor KC Chakrabarty told Firstpost.

Indeed, the government’s hurry to print the stock of Rs 500 notes and the lack of preparedness while doing so was evident when two versions of Rs 500 notes appeared in the public. There were printing errors on certain features like the shadow of Mahatma Gandhi’s picture, placement of the national emblem, colour shade and border size. This shows noting but lack of preparedness by the central bank as far as Rs 500 notes are concerned.

Salary rush and hoarding

In the coming days, the scenario could turn even tougher for banks given that salaries will get credited to employee accounts and to draw this money, there could be long queues before ATMs and bank branches.

Evidently, there isn’t enough lower denomination notes to go around, which means some of the state governments will find it tough to give salaries. One example is Kerala government, which has already written to the RBI citing the lack of availability of currency to give salaries. The state has sought about Rs 1,200 crore worth notes to give salaries and pensions from the RBI, according to reports in local newspapers.

What will likely add to the pain is the hoarding tendency of people till the time cash withdrawal limits stay. As of now, there is a weekly withdrawal limit of Rs 24,000 at branches and Rs 2,500 daily limits at ATMs. Even Jan Dhan account withdrawals have been capped at Rs 10,000 a month, as a temporary measure. All this would mean that the public who draw cash at ATMs and bank branches would be hesitant to spend it except for basic necessities. When the speed of the circulation of the money is slow, that will add to an artificial cash shortage. That is even the money printed out of mints wouldn’t return to the system fast.

This, in other words means, banks will struggle to fill up their ATMs and permit higher withdrawals. Even now, most banks are seeking the KYC details of their own customers who come to the counter to withdraw money, to ensure the person is the account holder and the need is genuine. But, beyond a point, banker at the counter cannot keep doing this. Until the government presses churn out sufficient number of cash units into the system, the RBI would not be in a position to remove withdrawal restrictions for public. More withdrawal restrictions, such the current one on Jan Dhan accounts, signal danger to the common man and tell him the problem persists and he needs to be cautious with the cash in hand.

For now, the most optimistic assessments show the cash situation to turn normal only by March at the earliest, that is if the four government printing presses work in full capacity in three shifts. Until the time Rs 500 notes are available in plenty, there is an issue. The Rs 2,000 notes repel the average user as there is no change out there. One should hope that the RBI and the government prove these predictions wrong.

First Published On : Nov 30, 2016 13:59 IST

Note ban: Rs 8.45 lakh cr old notes deposited in banks in 17 days

Banks have witnessed exchange and deposits of old high denomination Rs 500 and Rs 1,000 notes worth Rs 8,44,982 crore (Rs 8.45 lakh crore) until 27 November, the RBI said in a press release on Monday.

Of this, exchange amounted to Rs 33,948 crore and deposits Rs 8,11,033 crore (Rs 8.11 lakh crore). Meanwhile, banks saw withdrawals of Rs 2,16,617 crore from their accounts either over the counter or through ATMs.

RBI Reuters 380RBI Reuters 380


Earlier on 21 November, the central bank had said such transactions until 18 November amounted to Rs 5,44,571 crore with exchange at Rs 33,006 crore and deposits at Rs 5,11,565 crore. The withdrawal as of 18 November stood at Rs 1,03,316 crore.

The latest deposit numbers is about 84 percent of the target the government has set itself – Rs 10 lakh crore – for accrual from the demonetisation exercise. The figure was revealed in attorney general Mukul Rohatgi’s submission before the Supreme Court.

It is to be noted that the deposit and exchange figure of Rs 8.45 lakh crore has been achieved in just 17 days after demonetisation. After the government announced the measure on 8 November, banks remained shut for one day on 9 November. The exchange/deposit started on 10 November even as ATMs remained shut for one more day.

First Published On : Nov 29, 2016 09:08 IST

Demonetisation: How can farmers who cannot read do e-banking? asks Manish Sisodia

New Delhi: Delhi Deputy Chief Minister Manish Sisodia on Sunday asked Prime Minister Narendra Modi how millions of farmers and labourers could do e- or mobile banking when they can’t read or write.

Manish Sisodia. PTI

Manish Sisodia. PTI

“M-banking/e-banking is best. But how can you force millions of farmers, labourers, traders who can’t even read or write?” Sisodia asked in a tweet.

He also asked Modi to check if his MPs and secretaries used mobile and banking/e-banking.

“Modiji! Before forcefully imposing it on millions of farmers, labourers, traders, please check if your 100 MPs are using mobile banking,” Sisodia said.

His remark came after Modi on Sunday urged the people to embrace e-banking and mobile banking for cashless transactions.

“Modiji! Do u have 100 Secretaries in your government who use it in daily life? If not, why force millions of farmers, labourers, traders?” Sisodia asked.

First Published On : Nov 27, 2016 15:13 IST

Note ban: Agriculture market in Maharashtra crumbles after demonetisation

By Abhishek Waghmare,

A week after Prime Minister Narendra Modi announced the scrapping of Rs 500 and Rs 1,000 notes – 86 percent of India’s currency notes by value – business in the agricultural market of Pathardi, 350 km east of Mumbai, fell by 60 percent, indicating how the rural economy of India’s richest state, Maharashtra, recovering from two years of drought, is slowing down.

Pathardi’s Agriculture Produce Market Committee (APMC), representative of 2,500 such markets in India, is where most agricultural trade in the region takes place–almost all of it in cash. A slowdown in these markets can have wide-ranging effects on farmers, traders and the Indian agricultural economy.

The agricultural market at Pathardi, in Ahmednagar district of Maharashtra, is where most agricultural trade in the region takes place. Market registers showed that arrival of vehicles loaded with agricultural produce fell by 75%, cotton by 80%, and the sale of cattle fell by 50%, in comparison to the week before the ban of notes. Image courtesy: IndiaSpendThe agricultural market at Pathardi, in Ahmednagar district of Maharashtra, is where most agricultural trade in the region takes place. Market registers showed that arrival of vehicles loaded with agricultural produce fell by 75%, cotton by 80%, and the sale of cattle fell by 50%, in comparison to the week before the ban of notes. Image courtesy: IndiaSpend

The agricultural market at Pathardi, in Ahmednagar district of Maharashtra, is where most agricultural trade in the region takes place. Market registers showed that arrival of vehicles loaded with agricultural produce fell by 75%, cotton by 80%, and the sale of cattle fell by 50%, in comparison to the week before the ban of notes. Image courtesy: IndiaSpend

The arrival of vehicles loaded with agricultural produce entering the Pathardi market fell by 75 percent, arrival of cotton dropped by 80 percent, and the sale of cattle fell by 50 percent, in comparison to the week before the ban of notes, according to data gathered by IndiaSpend from market officials.

Source: Pathardi Agriculture Produce Marketing Committee, Ahmednagar

To get Rs 100 notes, a farmer sacrifices 15 percent income

The ban on Rs 500 and Rs 1,000 notes has pushed farmers – who transact in cash and are still largely distanced from formal banking institutions – out of the farm economy.

Bhimsen Mahadev Ghuge, a 50-year-old cotton farmer, lost 15 percent on a cotton transaction. He did not want the money in old notes, so he sold his produce to an unregistered trader outside the APMC market gate for Rs 4,200 per quintal, lower than the market rate of Rs 5,000 per quintal.

“I have to manage my family expenses and pay the wages of labourers who work in my farm in Rs 100 notes,” Ghuge said. “I have incurred a huge loss this season.”

Traders at the Pathardi market were willing to pay for produce and cattle in old notes or, new notes of Rs 2,000. But farmers, whose daily expenses are much lower, are unwilling to take Rs 2,000 notes, unsure of whether they would be able to change it for more usable notes of smaller denominations.

Farmers said they did not want old notes because they were uncertain they would be able to exchange the notes for new currency.

“Initially, some farmers accepted the old notes confident they could deposit the money in the bank. But few farmers continued to accept the old notes after 21 November,” Vaibhav Dahiphale, director of the Pathardi APMC, told IndiaSpend. Still, traders continued to transact in old cash and as a result several have had to shut shop, said Dahiphale.

Note Ban Reduced Cotton Sales

Cotton reaches the market in November, and APMC officials expected daily transactions to reach Rs 50 lakh ($77,000) because of a good harvest this year, Dahiphale told IndiaSpend. But, after demonetisation, transactions amounted to a maximum of Rs 30 lakh ($46,000) a day, based on data collected from the market.

Some traders, such as those buying cotton, have shut shop to protest against the unavailability of cash in the market, and blamed the government for not ensuring enough cash.

If there is no cash, why can’t traders pay farmers by cheque?

Traders in Pathardi APMC do not prefer cheque as a mode of payment to farmers, IndiaSpend found, as they keep most of their money in the form of cash.

Farmers too feared that cheques might not translate into money in their bank accounts. “I am not sure I will receive money after I deposit the cheque. The cheque might bounce,” said Ghuge.

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First Published On : Nov 26, 2016 17:49 IST

Demonetisation: Jewellers say wedding season ruined as sales fall 80% but hope for brighter future

Demonetisation has dealt a body blow to the demand for gold, a must-have accessory in Indian weddings. Demand for gold jewellery has dropped down as much as 80 percent with gold stores seeing drastically reduced footfalls and low volumes.“Yeh season toh gaya,” said Sumeet Anand, proprietor, of Indore-based Punjabi Saraf Jewellers, a 70-year-old store. This is the sentiment that is being echoed by most jewellers whom Firstpost spoke to.

When Prime Minister Narendra Modi announced demonetisation late on 8 November, there were many who rushed to their family jewellers and made big ticket purchases. There were reports that some jewellers were willing to backdate bills to enable those with black money and annulled notes to convert it into jewellery.



With the government raiding many jewelers subsequently who helped people buy jewellery and also reports of gold being sold at a premium against black money has since stemmed the tide towards buying of jewellery.

Since 9 November, the rush for gold has petered down to a trickle. The demand is down to almost 80 percent now, said the jewellers.

The reason for the fall can be pinned down to the prevailing circumstances in the country with availability of limited cash from banks and ATMs, said Sreedhar GV, chairman, All India Gems and Jewellery Trade Federation. “We are witnessing a drop of around 75-80 percent. If there is not much circulation of money in the country due to demonetisation, business cannot be buoyant,” he said.

Cash crunch

On 8 November, when the PM announced the demonetisation in his televised address, he had said, “From 10th November till 24th November the limit for such exchange will be 4,000 rupees. From 25th November till 30th December, the limit will be increased.” The limit was then reduced to Rs 2,000 and then completely discontinued from Friday (25 November).

The cash crunch with flip-flops of the government announcement has severely affected people’s daily lives. In such a situation, the priority of most would not be to shop for gold ornaments. For jewellers, this is particularly painful as November is the start of the high-demand wedding season in several parts of the country.

The big-ticket jewellery shopping has been slashed and even gifts for close relatives have been pruned substantially. “Earlier, customers would buy jewellery amounting to Rs 15-20 lakhs. But now that has come down drastically to a couple of lakhs for the bride. There is no scope to buy gifts for relatives in these circumstances. That has become a luxury,” said Sreedhar.

The major change in the buying pattern is that cash is being replaced largely by cheques or online payment methods. The cash component earlier would be 80:20 with the latter being cheque or online payment modes, which has now become almost equal at 50:50, said a jeweller from Mumbai.

Anand, proprietor, Punjabi Saraf Jewellers, has witnessed a slow rise in footfalls after November 15. He said that being the wedding season people are forced to buy jewellery as it is a tradition in the Indian weddings.

“After Diwali, which, incidentally, was a very good season for us this year, the wedding season is the next big highlight for us. But post demonetisation, we are seeing very few gold sales,” said Anand.

The pattern of gold shopping for this season too has undergone a change. Earlier, weddings meant buying of new jewellery through cash and online payments. But now, old gold is being sold and new ones are being purchased in exchange. Though bridal jewellery is being bought in smaller quantities, the quantum has been reduced for everyone else in the bride’s family, and in some instances done away with unless avoidable. “Earlier, buying chain and pendant sets of Rs 50,000 for close relatives was a norm, but now that is not to be seen so far this season,” said Anand.

Jewellers admit there is indeed black money in the sector, but while flushing it out lock, stock and barrel, there are certain concerns. “We have housewives coming to us with their savings over the years for a special occasion and are now in a fix with the annulled notes in their possession. They are dazed and worried about what to do with that money. But there is nothing we can do to help them,” said a jeweller from Chhatisgarh.

With no surplus cash in hand to buy jewellery, the wedding season in the country has lost its sparkle. “When people are finding it to run their daily requirements on limited cash, they are not in a mood to even think about jewellery shopping. Gold is not an essential commodity after all,” reasons Asok Minawala, partner in the 80-year-old store Mumbai-based Danabhai Jewellers and Sons. He has seen only small ticket buyers in the range of Rs 8-10 this wedding season.

In the south, the wedding season is on only until December and then mahurats or auspicious days begin post-January 15 till mid-March. But demonetisation has brought down business to almost 90 percent in the South. “We thought there would be hardly any business post-demonetisation,” said Ananthapadmanabhan, MD, NAC Jewellers, a 43-year-old jewellery chain with nine stores in Chennai, but is thankful that the wedding season has brought in a business of 20-25 percent.

“Usually, the big ticket buyers purchase their jewellery months in advance. It is the middle and lower middle classes who make their purchases closer to the wedding dates,” he said, adding that the latter’s purchases have been negligible so far. The footfalls to the store has begun to pick up to almost 20-25 percent because of small ticket purchases. After mid-December, non resident Indians arrive in the country to attend weddings or to buy jewellery, said Ananthapadmanabhan. He was worried wondering how their shopping behaviour would turn out to be under the prevailing circumstances post-demonetisation in the country.

In the East in Calcutta too, limited shopping and footfalls have watered down the otherwise bright time of wedding season buys. P C Jewellers said the demand for wedding jewellery has fallen up to 60 percent due to the demonetisation. The company expects the pent-up demand to drive revenue growth in the coming months.

Fall in prices

At the beginning of October, gold prices had tumbled to Rs 30,020 per 10 grams, after a month of steady run at around Rs 31,000. The price on Dhanteras, an auspicious day for buying gold, was at Rs 30,590 per 10 grams in the national capital, about 16.6 percent higher than price on the corresponding day in 2015.

With prices currently further down at Rs 29,000, jewellers say the current sentiment should change once people are able to access their money in banks.

What the market is witnessing is a course correction, say jewellers and are confident that though the marriage season sales have been impacted by demonetisation, the business will peak in the next quarter.

India’s gold exports were up 10 percent and diamond exports 15 percent in the last two months, said Praveenshankar Pandya, chairman, Gems & Jewellery Export Promotion Council. The total diamond exports were around Rs 1,900 crore and is expected to clock Rs 2,000-2,100 crore next year, he said. With regard to gold jewellery exports, it was lower at Rs 3,800 crore this year against over Rs 4,000 crore last year, he said.

Pandya said the good impact of demonetisation on the trade would be for the traditional clusters like Zaveri Bazaar in Mumbai, for instance, and other such gold bazaars in the country to move into jewellery parks so that around 15 million NRIs too can shop more easily. “It will also generate more employment upward of 5 billion if more parks are set up across the country,” said Pandya.

The trade is hopeful that with the course correction in the industry, the ‘temporary slump in demand’ will see growth and better sales next quarter.

First Published On : Nov 26, 2016 10:03 IST

Note ban: ‘Printing’ errors in new Rs 500; is haste killing the very purpose of the exercise?

In its hurry to meet the demand for new notes, the Reserve Bank of India has made major errors which can have serious consequences for the demonetisation exercise. The gaffe — RBI has printed two variants of the new Rs 500 notes.

According to a report in The Times of India, the newspaper has seen at least three case studies where the new Rs 500 note varied from each other. According to one customer quoted in the report, Gandhi’s face has a more than visible shadow. Apart from this, he has pointed to alignment issues with the national emblem and also serial numbers.


Representational image. Reuters

Another Mumbai resident has told the newspaper that the colours of the notes he got were different. The report has cited one more such instance of variation.

Meanwhile, a RBI spokesperson has termed them as “printing defects” that have propped up because of “the current rush”. She has also said people can still freely use it for transactions or even return it to the central bank.

One thing is for sure: the same note with different features would mean confusion for the common man. It will be easy for the ‘experts’ in counterfeiting to cash in on this confusion.

How is the common man to know whether the Rs 500 note he has is indeed original or fake? It has to be remembered that the fake note circulation has been rampant in India despite the RBI’s frequent notifications on how to detect such notes.

Clearly, the awareness level among the general public about the security features of currency notes is very low. Notes with slight variations in features will only add to the confusion about the features.

Announcing the decision to withdraw Rs 500 and Rs 1,000 notes and issue new ones on 8 November, the prime minister had said that the move was aimed at destroying the counterfeit racket, ending terror funding and also stop black money generation.

If the haste has resulted in errors that will only facilitate counterfeiting, then it will kill the very objective of the demonetisation exercise.

Interestingly, the RBI had published on its site the security features of the new Rs 500 notes before the notes came into circulation.

It will be better for the RBI to find some practical solution to the problem before any damage is done.

First Published On : Nov 25, 2016 14:32 IST

Note ban: Govt extends suspension of toll charges on National Highways till 1 December

New Delhi: The government on Thursday announced it was extending the suspension of fee collection at all toll plazas on National Highways in the country until 1 December.

“Toll suspension is extended until 1 December midnight across all national highways,” Minister of State for Road Transport and Highways, Shipping, Chemicals and Fertilisers Mansukh Mandaviya tweeted.

Earlier, the government suspended fee collection at all toll plazas on National Highways till the midnight of 11 November. This was subsequently extended thrice – and the last extension was to end on the midnight of 24 November.

The Ministry had previously said that instructions for the suspension of fee collection had been issued to all the concessionaires, including BOT (build-operate-transfer), OMT (operate-maintain-transfer) operators and other fee collection agencies.

The decision has been taken to avoid any inconvenience to highway users following the demonetisation of Rs 500 and Rs 1,000 currency notes.

On 22 November, the government had also extended the suspension of vehicle parking charges at all airports till the midnight of 28 November.

Even, the Indian Railways have waived off service charges for ‘e-tickets’ and ‘i-tickets’ booked through Indian Railway Catering and Tourism Corporation (IRCTC) until 31 December.

First Published On : Nov 24, 2016 18:36 IST

Demonetisation: Since 8 Nov, banks have released 10% of the value of deposited illegal notes

Since the time the Narendra Modi government announced the demonetisation of Rs 500 and Rs 1,000 notes on 8 November, Indian banks have released Rs 1.36 lakh crore worth of currency, which is 10 percent of the total money withdrawn by the government, according to a report by The Times of India.

Referring to fresh data released by the Reserve Bank of India (RBI) on Monday, the report said that the total value of currency released in the form of exchange of old notes and cash withdrawals  “is less than 10 percent of the Rs 14 lakh crore in high-denomination notes (Rs 500 and Rs 1,000) that has been rendered illegal by the government’s strike against black money”.

Representational image. PTI

Representational image. PTI

However, banks have received scrapped notes worth “more than Rs 5,44,571 crore” in deposits between 10 November and 18 November, which is roughly four times the currency released since 10 November.

What this means is that banks (including RBI) now have more liquidity than the public.

The excess of liquidity with the banks has spread rumours that the RBI might soon announce an interest rate cut on the one hand to make loans more attractive to both banks and the public. There are also rumours that tax rates may fall.

Of the total currency that was released, the banks “have pumped Rs 1,03,316 crore into the system through withdrawals (through branches as well as ATMs) by account holders and another Rs 33,006 crore via exchange of old notes”, The Times of India report said.

Meanwhile, queues outside ATMs and banks have not shortened even as the demonetisation move enters the 14th day on Tuesday. Over 70 people have lost their lives so far. Several people have also moved to the Supreme Court against the deaths.

According to IANS , Congress leader Sanjay Nirupam said that the prime minister should be booked for murder under Section 302 of the Indian Penal Code.

First Published On : Nov 22, 2016 17:15 IST

Demonetisation: I-T issues notices to those depositing huge cash post Rs 500, Rs 1,000 ban

New Delhi: Acting swiftly, the Income Tax Department has issued hundreds of notices seeking “source” of funds from individuals and firms who have deposited huge amounts of cash in banks using the scrapped Rs 500 and Rs 1000 currency notes after 8 November.

Officials said the taxman has begun a country-wide enquiry in this regard and has issued notices under Section 133 (6) of the Income Tax Act (power to call for information) in various cities and towns of the country.

They said the notices were issued after banks reported to it certain cases of “unusual or suspicious volumes of cash deposits” in their accounts, primarily beyond Rs 2.5 lakh.

Representational image. Image courtesy: AFP

“The notices are being issued where the department feels the cash deposits made in the demonetised currency is suspect. This is part of the vigil that the taxman has deployed to check instances of tax evasion, money laundering and black money in the wake of the demonetisation of the two high denomination currencies on November 8,” they said.

The notices issued by the department cite the date and amount deposited by an entity in the old currency in the bank as it goes on to seek “supporting documents, books of accounts and bills to explain the said cash deposits” from them.

“If you are assessed to Income Tax then you shall also file the copy of Income Tax Return of last two years,” an I-T Department notice issued in this regard said.

In the wake of the demonetisation declared by Prime Minister Narendra Modi on November 8, the department has also stepped up its survey operations against real estate players, bullion traders and suspected hawala operatives to check the illegal use of the scrapped currency and subsequent generation of black money.

The taxman has also deployed a similar check at cooperative banks and in one case in Mangalore it found that old currency worth Rs eight crore was exchanged by five societies which had accounts in a cooperative bank there.

The department has also recently issued notices to hundreds of charitable and religious organisations in the country enjoying exemptions on tax paid to inform it about their cash balances as of November 8 when the government demonetised Rs 500 and Rs 1,000 currency notes.

The notices were issued in order to keep a check on possible “accommodation” of black money in old currency by way of making charitable contributions or donations to these organisations.

First Published On : Nov 19, 2016 17:10 IST

Demonetisation: Point of sale cash withdrawal limit in large towns increased to Rs 2000

Mumbai: Reserve Bank of India today said cash withdrawal limit from Point of Sale in large cities and towns has been doubled to Rs 2,000 per day and customer charges have been waived in the wake of demonetisation of old Rs 500/1000 currency notes.

The RBI had earlier instructed banks to waive ATM charges for all transactions by saving bank customers, irrespective of the number of transactions from 10 November till 30 December.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

“As another customer-centric measure, it has been decided that the limit for cash withdrawal at POS has been made uniform at to Rs 2,000 per day across all centres (Tier I to VI) for all merchant establishments enabled for this facility,” it said in a notification.

Further, customer charges, if any, being levied on all such transactions has been waived off till 30 December.

The central bank in August 2015 had permitted cash withdrawals at Point of Sales (POS) up to Rs 1000 in Tier I to II centres and up to Rs 2000 in Tier III to VI centres.

The invalid banknotes can be exchanged at branches of commercial banks, Regional Rural Banks, Urban Cooperative banks, State Cooperative Banks and RBI till 30 December 2016 and even beyond, at specified RBI offices.

First Published On : Nov 18, 2016 21:51 IST

Demonetisation has prepared India for war-like situation: If you are not bleeding, you are fake

Last week began on a reassuringly predictable note. We continued to be apoplectic over the killer smog that was choking the bejeesus out of the National Capital Region. We exchanged horrified notes on PM 2.5 levels that were skyrocketing away. We counted the metaphorical cigarettes we were supposed to be smoking just by breathing the foul air. “What was the government doing, dammit,” we fumed in unison, as we headed out to stock up on air purifiers and face masks.

While at it, most “look West” urban Indians got ready to follow the results of the US Presidential elections. Was it going to be Donald Trump, whose rhetoric of racism, misogyny and xenophobia was quite as toxic as Delhi’s air? Or, would it be the staid old Hillary Clinton who came with her monochrome pantsuits and her mystifying email scandal? We seemed as interested in the outcome of the contest as the average American.

People queue up to change their old currency notes outside Bank of India in New Delhi. PTI

People queue up to change their old currency notes outside Bank of India in New Delhi. PTI

Which, of course, was totally anti-national on our part.

So, anyway, there we were chinwagging about pollution (Delhi’s) and politics (America’s) on the evening of 8 November when Prime Minister Narendra Modi issued a sharp rap on our collective knuckles and swung our attention back to stuff that matters.

Forcing English news channels to ditch their wall-to-wall coverage of the US elections, the PM informed the nation that in just four hours, old notes of Rs 500 and Rs 1,000 would be rendered worthless. This was being done to put a spanner in the works of black money hoarders, we were told. And, we would be able to exchange our old, defunct currency for new notes when the banks open a day later.

It was a masterstroke — a surgical strike on black money — we, the tax-deducted-at-source people, trilled. Then we went rummaging in our wallets to see how much legit currency we had with us.

The outrage over untrammelled pollution vanished. Fickle as we are, the talk shifted at once from PM 2.5 to just PM, the slayer of the corrupt. Trump won, but we barely noticed. Were there soldiers dying in cross-border firing? Perhaps. But there were more pressing concerns now. You needed to pay the plumber who just fixed a blocked drain. And you were down to your last Rs 370 that would pass muster. Plus, you had to arrange cash for an elderly parent who refuses to use a credit or a debit card.

In the week since banks and ATMs reopened, the jury has been out on whether the demonetisation move is a financial masterstroke or a hasty, ill-thought political gambit. Small businesses have been cruelly squeezed, the cash-only rural economy shot. At last count, 47 people have collapsed and died while standing in interminable queues before banks and ATMs in the hope of withdrawing some money or getting some exchanged.

But, hey, I’m not complaining. Let the financial whizzes figure out how this will benefit — or bedevil — the Indian economy. I have to report that BJP spokesperson GVL Narasimha Rao was onto something when he said on a television show on Sunday, “This has brought the nation together.”

Indeed, it has. You thought death was a great leveller? Well, demonetisation comes pretty close. Standing in a serpentine queue at a bank or an ATM to pick up a bit of your own hard earned money, you’ve probably bonded with more strangers than you ever have in your life. It’s heartwarming to stand (for hours) in solidarity with this sudden, nationwide crisis, trying to clear each other’s befuddlement over government notifications that change quicker than mountain weather.

You can exchange Rs 4,000 in old Rs 500 and Rs 1,000 rupee notes. No, no, that’s been raised to Rs 4,500. Sure, but if you do that now, you’ll be inked! So you don’t come back and change money again — even if it is your own. And, wait, today’s bulletin is after 18 November, you can exchange only an amount of Rs 2,000 in those old notes.

Oh, and don’t forget, if you’re a farmer you can now withdraw Rs 25,000 per week against crop loan/Kisan Credit Card. And if you have a wedding in the family, the government, in its stunning munificence, will allow you to access Rs 2.5 lakh of your own money in cash.

Also, if that bright, new-minted Rs 2,000 note is running colour and you’ve been staring at it open-mouthed, pray close it forthwith. Economic affairs secretary Shaktikanta Das has averred, “It is supposed to bleed colour.” In fact, be very worried, if your brand new note is not bleeding like a stuck pig. It means it’s probably a fake.

Clearly, along with this hard lesson in making sacrifices for the good of the nation, we’re also learning to adapt quickly to this fast changing environment. Which is good news — because it means we aren’t endangered yet.

Besides, if the nation does go to war (as some nation lovers were vociferously advocating in the aftermath of the Uri attack), this experience of having to line up for rationed money would have been invaluable. After this, lining up for food rations during wartime would be a breeze.

Sceptics might be seeing red, but do consider the blessings of demonetisation. In the last one week, one has received the undivided attention of multiple sales people at a near-empty mall outlets. One has had the good fortune of being bumped up from a vanilla anti-national to a vile black money hoarder by Twitter trolls who will not brook the slightest criticism of the government. Last, but certainly not the least, one has finally discovered the joys of money laundering — the pure, unbounded joy of finding a scrunched but intact hundred rupee note in the pocket of a laundered shirt.

As the wise folks in the government keep telling us, there is no gain without a bit of pain.

The authro tweets @ShumaRaha

First Published On : Nov 17, 2016 16:01 IST

Demonetisation has boosted digital payments, says Freecharge’s Govind Rajan

While announcing demonetisation of Rs 500 and Rs 1,000 notes last week, Prime Minister Narendra Modi stated how the cash economy of India has been fuelling the growth of black money and corruption. And while it has been causing a lot of inconvenience to citizens, the move seems to have boosted digital modes of payments in India, says Govind Rajan, CEO, FreeCharge, who dropped by Firstpost on Wednesday to discuss how the demonetisation move has impacted the traditional, cash-based transaction system.

Rajan, who joined FreeCharge in 2015 tells us that Modi’s announcement on demonetisation has given digital payments a huge boost, adding that the move to digital payments is good for everyone, especially customers.

The main advantage, in his view, is a more efficient economy. Yes, the announcement did cause great inconvenience to a large number of people, but he’s happy that it’s also shifted the focus to a more secure payment platform.

Speaking of FreeCharge, an e-commerce website and digital wallet service all rolled into one, Rajan says that the number of transactions on their platform has gone up by 10 times.

“What we’re actually seeing is that the average value of the transaction is coming down. Customers are making smaller purchases, which is reflective of a daily purchase habit,” says Rajan.

Originally starting out as a quick means of recharging essential services, FreeCharge has since moved on to support electronic payments both online and offline. FreeCharge was acquired by Snapdeal in 2015.

FreeCharge isn’t the only player in this and it’s far from being the largest one. At last count, rival digital wallet service and e-commerce platform, PayTM, claimed 75 million daily transactions to FreeCharge’s 7 million.

Trust and inertia

Rajan places special emphasis on the word “inertia” when describing digital wallets. He believes that customers and merchants are only sticking to cash-based transactions because they’re comfortable with it.

He says that people have been using cash for so long that they’ve built up a level of trust and comfort with it. That whole experience of feeling the cash come and go feels more familiar than the relatively detached, virtual world of digital wallets.

In his own words, for some, “the transition is as drastic as switching from only oiling your hair to only shampooing it,” he says. You’re essentially doing the same thing, taking care of your hair, but the method is different. There’s a perceived security to the familiar.

“Not carrying cash on your person is in itself a big advantage in terms of security. Digital transactions are traceable and fraudulent transactions can’t be reversed. This is not possible with a cash transaction,” says Rajan.

On security
Digital transactions are inherently more secure because they use modern technology, says Rajan. FreeCharge alone performs over 500 security checks on every transaction. If there’s even one red flag, the transaction is cancelled. As an example, Rajan says that FreeCharge has a list of bank IFSC codes that are responsible for a lot of fraud and the company can simply blacklist those codes. You can’t do this with real cash.

Wallets store notes and these notes have some value, digital wallets do the same, except that the notes are virtual. You can also reverse digital transactions, track locations to prevent fraud and so much more. The RBI also has very strict guidelines in place and “the same mechanisms that authorise the cash in your wallet are behind digital wallets anyway,” he says.

While digital transactions are inherently more secure than cash transactions, they’re not perfect. The recent data breach, which compromised over 32 lakh debit cards is scary and unless digital wallet services follow stringent security protocols, there’s nothing stopping such a breach from happening again.

When asked about his thoughts on this, Rajan admitted that security was always a concern. However, he’s quick to point out that “the incidence of such fraud in India is half of what it is in the US and other western, developed countries.” He attributes at least part of this to the higher security standards, like two-step authentication, that’s been mandated by the RBI.

“There is a sense of fear, but people will overcome that once they experience the comfort and reliability of a digital transaction,” he adds. “These fears, part of them are rational, but part of them are because of inertia when you move from one product to the other.”

Rajan had a great deal more to say on Snapdeal’s acquisition of FreeCharge last year, the importance of design and the payment structure in the country. To learn about all this and more, watch the interview embedded above.

First Published On : Nov 16, 2016 21:19 IST

Demonetisation: Lack of lower denomination notes affects farming, construction activities

Berhampur (Odisha): Demonetisation of high denomination currency notes has badly hit agricultural and construction activities across Odisha, as cash-starved farmers are finding it hard to pay agricultural labourers, who are demanding wages in advance, that too in Rs 100 denomination.

People in Ganjam district said that they do not have enough cash to give to daily wage labourers.

Sudhir Rout, a farmer from Baiganabadi on the outskirts of Berhampur city in Ganjam district, said that he failed to pay the wages to labourers engaged in cutting crops.


Rout is in a fix as labourers are refusing to accept old Rs 500 and Rs 1,000 notes and he does not have enough Rs 100 notes to distribute among them.

Rout is not the only farmer facing such a problem. Several of them across the state are struggling to purchase ration, pay dues to agriculture labourers and manage various other expenses.

Another farmer from the district is facing a tough time in convincing labourers to work in his field. Due to this problem, he could not even complete harvesting. He had gone to a nearby market to withdraw money from the ATM, but it was not functioning.

The farmer tried to exchange money from the bank, but it handed him a Rs 2,000 note.

“What will I do with the new note? I struggled to change even Rs 1,000 note,” he said.

“Now the paddy crop is in harvesting stage but no one is ready to come and work unless I pay the wages in advance and in Rs 100 denomination,” said Rout.

The demonetisation crisis also affected construction activities in different areas. With labourers reluctant to accept Rs 500 and Rs 1,000 notes, people are seen struggling to secure Rs 100 notes to continue the construction work.

Several house owners have been forced to stop such activities.

“I have stopped construction work for the last three days as I do not have notes of smaller denominations to pay daily wage labourers,” Manoj Padhy, an advocate from Brajanagara in Berhampur, said.

First Published On : Nov 15, 2016 16:58 IST

Rs 500, Rs 1,000 note ban: Majority ATMs remains shut as banks fail to live up to challenge

The sudden demonetisation move by the NDA government faced mixed reactions from the public on Friday as banks failed to open ATMs to dispense cash. People queued up in front of ATMs from early morning only to be told by the bank officials that the machines were not working.

Ramesh Kumar who came to the Noida Sector 50 branch of the ICICI bank said that he was sure that the ATMs will be opened by Friday morning as the Prime Minister had declared on Tuesday. But he only met with frustration. “I came to collect cash from the ATM at 7 in the morning. But at 9 am I was told that dispensing money from the ATM will not be possible today,” he said.

Many of the people who visited banks were surprised to see “out of order” bills outside ATM booths.

New Delhi: People queue up outside a bank to exchange their old Rs 1000 and 500 notes in New Delhi on Friday. PTI Photo by Vijay Verma (PTI11_11_2016_000203B)New Delhi: People queue up outside a bank to exchange their old Rs 1000 and 500 notes in New Delhi on Friday. PTI Photo by Vijay Verma (PTI11_11_2016_000203B)

People queue up outside a bank to exchange their old Rs 1,000 and 500 notes in New Delhi on Friday. PTI

“I thought that ATMs will be opened today (Friday). I do not have (any) money. I have to go to work. I do not know what to do,” said Sahil Hussain, a customer.

Though ATMs were not working, most of the banks dispensed cash from their counters. Long queues were seen throughout the day in front of banks with people trying to withdraw money from the counters.

Raju Singh a shopkeeper near a branch of ICICI bank said, “I opened my shop at 7.30 am and saw a long queue outside the bank. I do not know from when they were standing.”

Pramod Chauhan who was waiting to collect cash from the bank said, “The bank is allowing only five or six people in at a time to collect cash or exchange money. So, it is taking too much time for the queue to end.”

Chauhan added that the inability of banks to open ATMs only added to the problem. “If ATMs were open than the queues would not have been so long,” he said, adding that he had been in the queue for more than five hours.

However, some like Sanjay Srivastava, a sales executive have been trying to collect cash since Thursday but had no luck even on Friday. “Yesterday I went to a bank to collect cash. My token number was 71. But the bank ran out of cash before my number was called. Today I am here in an another bank,” he said.

There are also some banks which did not dispense money but only accepted deposits.

The problems faced by the common man has prompted mixed reaction over the demonetisation move by Prime Minister Narendra Modi. However, some like small trader Sanjay Agarwal expressed his gratitude to the prime minister for his measure to curb black money. “Whatever is done is done for our welfare. We need to bear it with the nation. For it will make our economy flourish,” he said.

But another small trader who did not wish to be named said that the demonetisation move is going to do no good to the health of the economy. “Black money cannot be curbed only by changing the currency. That we can see from the galloping gold prices,” he said.

He also added that the new currency note of Rs 2000 denomination will make black money hoarding easier. “It will bring in troubles for the common man due to the difficulties in exchanging it with notes of smaller denomination,” he said.

The trader also criticised the banking industry’s inability to deal with the change in the currency policy. “Some political leaders in the opposition are alleging that the country has faced an economic emergency like situation because of the new currency. We know that it is not true. But what we know is that our banking industry lacks the resilience needed to face one given its inability to operate the ATMs even after 48 hours,” he said.

First Published On : Nov 11, 2016 20:13 IST