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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

Amid demonetization row, Rahul Gandhi leaves country to celebrate New Year

<!– /11440465/Dna_Article_Middle_300x250_BTF –>According to various media reports, Congress vice-president Rahul Gandhi has reportedly left the country to celebrate New Year in London. The Congress VP tweeted: “I will be traveling for the next few days. Happy New Year to everyone, wishing you and your loved ones success & happiness in this coming year.”Rahul Gandhi has been in the thick of the action in recent times, as he has criticised PM Modi for the demonetization move and also alleged that he had information of PM Modi’s personal corruption.Recently, Rahul Gandhi targeted Prime Minister Narendra Modi by posing five questions including the amount of black money recovered since November 8 and the number of jobs lost due to the dramatic decision. The Congress vice president took to Twitter asking the Prime Minister as to whom had he consulted before taking the decision and wondered as to why were “experts, economists and RBI not consulted”.His questions have come a day ahead of the Prime Minister’s address to the nation. Rahul sought to know as to who all deposited more than Rs 25 lakhs in bank accounts in six months preceding November 8 note ban decision.”With 50 days over since demonetisation, India is waiting for your answers to these five questions, Modiji. Amount of black money recovered after 8 November 2016? Economic loss to the nation and numbers of jobs lost? How many people died due to demonetisation? Has the compensation been paid? “Whom all did PM consult on demonetisation? Why were experts, economists, RBI not consulted? Who all deposited more than (Rs) 25 lakhs in bank accounts in six months preceding 8th November 2016?”

RBI’s refusal of details sheer arrogance, sets dangerous precedent: Activist Shailesh Gandhi

The most shocking aspect of the decision to demonetise the Rs 500 and Rs 1,000 currency notes by NDA government is the lack of transparency. The government and the RBI, the monetary authority, have not yet revealed the exact reason why the decision was taken or even about the current status of the economy and cash supply. There have even not been regular press releases or statements from the authorities through out the last 51 days.

The country’s central bank remained silent in the initial days of the demonetisation when the citizens had a harrowing time with cash crunch at banks and ATMs coupled with long queues that also led to even a few deaths of senior citizens. The role of the Reserve Bank of India and its new governor Urjit Patel has come for severe criticism.

Shailesh Gandhi. Image courtesy Shailesh Gandhi's Facebook pageShailesh Gandhi. Image courtesy Shailesh Gandhi's Facebook page

Shailesh Gandhi. Image courtesy Shailesh Gandhi’s Facebook page

Shailesh Gandhi, former Information Commissioner with the Central Information Commission (CIC), New Delhi, filed a complaint with the CIC over the RBI’s refusal to answer queries under Right to Information Act by a non-disclosure policy put up on its site on November 30. In a conversation with Firspost, Gandhi explains why the RBI is on the course to setting a dangerous precedent by its refusal to answer queries and setting up its list under its non-disclosure policy which goes against the exemptions laid under the RTI Act, passed by the Supreme Court.

Excerpts from the conversation:

Your take on RBI’s unwillingness to respond to RTI queries.

This is sheer arrogance on the part of the RBI. Almost everyone in power dislikes transparency for themselves, be it the courts, bureaucrats, the RBI and even the media for that matter. Arrogance weighs with everyone who will say that in theory the RTI is good but when asked to release information, will remark: I am not corrupt. I am honest and clean and why should any ordinary citizen question me. Even the honest dislike the RTI and are happy to tell others to be transparent. It takes time to get used to being questions. It is 11 years since the RTI Act came into force.

What the RBI is doing by refusing to answer queries under RTI is denying citizens their fundamental rights. There are ten exemptions under the RTI. These do not include what the RBI is stating as exemption for itself. The central bank has also not given any reason for its actual rejection to the questions posed to it under the RTI.

Our RTI Act is the best in the world and we now rank at number 4 in terms of provisions of law and at 66 with regard to implementation. The Act is grossly misrepresented. The courts also have not been very enthusiastic about it.

You have filed a case against RBI’s refusal with the CIC

Yes, I have filed a complaint with the CIC on 16 December that the RBI is arbitrarily claiming exemption and have spread the net very wide in the garb of following the law and are actually defying the law. I did that because the RBI could set a bad precedent which is dangerous that could lead other public authorities to follow it, which could lead to increase in the load on the CIC. Everyone will compile their own non-disclosure list like the RBI has done and the CIC will not be able to penalise them. I hope the Supreme Court and the CIC takes cognisance of it.

The RBI has in its Disclosure Policy on its site on 30 November said that the list of information which shall not be given is justified by the proclamation that: ‘While compiling the ( nondisclosure) list, it has been the Bank’s endeavour to attain the objectives of the RTI Act, without jeopardizing the financial stability and economic interests of the State.’ Effectively it means that RBI arrogates to itself the right to lay down exemptions to disclosure of information in line with the objectives of the Act. This is the sole prerogative of Parliament which has provided the exemptions to disclosure in Section 8 and 9 of the RTI Act. The RBI’s disclosure policy is actually a non-disclosure. They are the masters and the judges themselves.

What are the 10 areas that are exempted under the RTI Act?

1) To give information, disclosures which would affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence; 2) information which has been expressly forbidden to be published by any court of law or tribunal or the disclosure of which may constitute contempt of court; 3) information, the disclosure of which would cause a breach of privilege of Parliament or the State Legislature; 4) information including commercial confidence, trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party, unless the competent authority is satisfied that larger public interest warrants the disclosure of such information; 5) information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information; 6) information received in confidence from foreign government; 7) information, the disclosure of which would endanger the life or physical safety of any person or identify the source of information or assistance given in confidence for law enforcement or security purposes; 8) information which would impede the process of investigation or apprehension or prosecution of offenders; 9) cabinet papers including records of deliberations of the Council of Ministers, Secretaries and other officers: Provided that the decisions of Council of Ministers, the reasons thereof, and the material on the basis of which the decisions were taken shall be made public after the decision has been taken, and the matter is complete, or over: Provided further that those matters which come under the exemptions specified in this section shall not be disclosed; 10) information which relates to personal information the disclosure of which has no relationship to any public activity or interest, or which would cause unwarranted invasion of the privacy of the individual unless the Central Public Information Officer or the State Public Information Officer or the appellate authority, as the case may be, is satisfied that the larger public interest justifies the disclosure of such information: Provided that the information, which cannot be denied to the Parliament or a State Legislature shall not be denied to any person.

When Supreme Court orders are not being adhered to by the RBI, can no action be taken on the institution?

When you defy SC orders, the CIC cannot do anything. The commission has the authority and power to say that the list you put up is too wide ranging and can’t be accepted. That’s all.

First Published On : Dec 31, 2016 12:24 IST

Demonetisation: RBI ups ATM withdrawal limit to Rs 4,500/day from 1 Jan

The Reserve Bank on Friday late night increased the withdrawal limit from ATMs to Rs 4,500 per day from the current Rs 2,500 from 1 January. However, there has been no change in the weekly withdrawal limit, which stands at Rs 24,000, including from ATM, for individuals (Rs 50,000 in case of small traders).

“On a review of the position, the daily limit of withdrawal from ATMs has been increased (within the overall weekly limits specified) with effect from January 1, 2017, from the existing Rs 2,500 to Rs 4,500 per day per card,” the central bank said in a notification.

atm-queueatm-queueFollowing demonetisation of old Rs 500/1000 notes from 9 November, limits had been imposed on withdrawal of cash from banks as well as ATMs.

The Reserve Bank’s notification further stated “there is no change in weekly withdrawal limits” and such disbursals “should predominantly be in the denomination of Rs 500”.

Earlier in the day, the RBI had permitted White Label ATM Operators (WLAOs) to source cash from retail outlets.

Most of the White Label ATMs are running dry since demonetisation as the operators were facing difficulties in sourcing cash from their sponsor bank(s).

Friday was the last day to deposit the invalid currency notes in banks. However, people still have time to exchange the currency notes at designated RBI counters till March 31 after giving valid reasons for not depositing defunct notes in their accounts by December 30.

However, it remains to be seen whether the relaxation in cash limits will be of any help to the customers as, according to media reports, banks do not yet have enough cash to supply to the ATMs.

A report in The Indian Express on Friday said only 40 percent of the 2.2 lakh ATMs in the country have cash to serve the public.

The report quotes Ramaswamy Venkatachalam, managing director, India and South Asia, Fidelity Information Services (FIS), as saying that banks are not meeting the “full cash requirement” to operate ATMs round the clock.

The RBI and the government also seem to be clueless about when the cash situation will return to normalcy, though they insist there is enough notes to dispense.

Even on the 50th day of demonetisation they have not been able to provide the update the details of the new currency issued and also the deposits of old notes received.

The last press release on the cash situation was on 21 December from the RBI. As of 19 December, the banks have issued Rs 5.93 lakh crore to public either over the counter or through ATMs. That is a nearly 40 percent of the cash sucked out of the system on 9 November, when the demonetisation came into effect.

In this backdrop, while the public and the authorities are remain clueless about when the cash situation will improve, the increase in withdrawal limit from ATMs would mean little for the customers.

With PTI

First Published On : Dec 31, 2016 09:41 IST

Demonetisation: Withdrawal limit from ATM hiked to Rs 4,500 per day from 1 January

Mumbai: In a relief to common man, the Reserve Bank of India (RBI) on Friday said cash withdrawal limit from ATMs will be increased to Rs 4,500 per day from the current Rs 2,500 from 1 January.

Representational image. Reuters

Representational image. Reuters

However, there has been no change in the weekly withdrawal limit, which stands at Rs 24,000, including from ATM, for individuals (Rs 50,000 in case of small traders).

“On a review of the position, the daily limit of withdrawal from ATMs has been increased (within the overall weekly limits specified) with effect from 1 January 2017, from the existing Rs 2,500 to Rs 4,500 per day per card,” the central bank said in a notification.

Following demonetisation of old Rs 500/1000 notes on 9 November, limits had been imposed on withdrawal of cash from banks as well as ATMs.

The RBI’s notification further stated “there is no change in weekly withdrawal limits” and such disbursals “should predominantly be in the denomination of Rs 500”.

Earlier in the day, the RBI had permitted White Label ATM Operators (WLAOs) to source cash from retail outlets.

Most of the White Label ATMs are running dry since demonetisation as the operators were facing difficulties in sourcing cash from their sponsor bank(s).

Friday was the last day to deposit the invalid currency notes in banks. However, people still have time to exchange the currency notes at designated RBI counters till March 31 after giving valid reasons for not depositing defunct notes in their accounts by December 30.

First Published On : Dec 31, 2016 08:34 IST

Total mismanagement and administrative collapse: P Chidambaram flays PM Modi

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Former finance minister and senior Congress leader P Chidambaram on Friday took a jibe at Prime Minister Narendra Modi, saying since 50 days of the demonetization drive are over, all restrictions should be removed and normalcy should be restored.’It is fair to expect that there will be no queues outside bank branches and ATMs. It is fair to expect that all ATMs will be open round the clock and fully stocked with currency notes. It is fair to expect that the bank branch will pay out the money written on the cheque and not direct the drawer to write another cheque for a smaller amount,’ Chidambaram said while addressing media.Chidambaram sarcastically said that only the Prime Minister can provide an assurance on the removal of restrictions after 50 days of demonetization as the opposition has been dubbed as supporters of black money hoarders and tax evaders by him.’I wish I could hold out assurances on the matter (demonetization), but none of us in the opposition can, because the government has dubbed all of us in the opposition as supporters of black money hoarders and tax evaders,’ he said.Condemning the government for implementing a currency ban without prior planning, Chidambaram reiterated his opinion of demonetization being a case of total mismanagement.’I had also cautioned that the test of demonetization lies in the manner in which it will be implemented. It is now abundantly clear that the whole exercise was undertaken without forethought and planning; without consulting key officials; without understanding the crucial role of money in circulation’ Altogether, the whole exercise has been a case of total mismanagement, administrative collapse and widespread corruption,’ he said.Pointing towards government’s changing stand on the announcement, Chidambaram called it an absurd and undesirable goal. ‘The government has tried to change the narrative from black money and corruption to a cashless economy. No economy can become — or has become – totally cashless. We support encouraging high-value transactions to adopt the digital mode, but to insist that even low-value transactions should go cashless is an absurd and undesirable goal,’ he said.The minister also put forward his two demands and urged the Reserve Bank of India (RBI) to make it public- 1. The Agenda note and the minutes of the meeting of the Board of Directors of RBI held on November 8, 2016; and2. The Note for Cabinet on demonetization placed before the Cabinet on November 8, 2016.Prime Minister Modi is all set to address the nation on New Year’s Eve regarding the same issue of demonetization, which marked its 50 days on Friday.

Demonetisation Day 50: Expect no clear winner in this drawn Test for Indians

For a nation that loves cricket, the demonetisation drive launched by Prime Minister Narendra Modi on November 8 to pull out 86% of the cash floating in India’s economy has been like a one-day match, with roughly 50 days to the core deadline set by the government to swap bad cash with good resembling the number of overs in a game full of twists and turns.

As Modi gets ready to address the nation on December 31 in a stock-taking speech, sober watchers of the game may find no nail-biting finish or clear winner. We might need to use something resembling the Duckworth-Lewis method that cricket scorers use when rains or disruptions mar a match.

PTI file photoPTI file photo

PTI file photo

We can expect the prime minister to announce on Saturday some populist handouts that would make the headlines on the New Year Day as he declares partial victory in a long-term war on black money that he will vow to carry on. But the real ammunition may be held back until the February 1 budget.

What is clear is that there is no fairy tale El Dorado of a huge pile of unambiguously wasted black cash as it was being made out soon after the government pulled the plug on old 500 and 1,000-rupee notes. There was talk of a fiscal bonanza for the government through a windfall dividend from the Reserve Bank of India then. The RBI has since virtually ruled out such a possibility.

Of the Rs 15.4 lakh crore worth of scrapped currency, some Rs 14 lakh crore has been deposited in banks or exchanged already. Some more money may trickle in through the ambiguous Pradhan Mantri Garib Kalyan Deposit Scheme window over the next three months or in last minute deposits on Friday. Clearly, there is no winning shot in this match in sight.

What we can expect next is a patient round of bean-counting in the Finance Ministry as taxmen zero in on high-value cash deposits. Some 60 lakh depositors have put in deposits totalling Rs 7 lakh crore since November 8 in instances exceeding Rs 2 lakh each. But toothcombing these and actually calling the bluff on tax evaders may take months or years and in cases involving big fish, involve appeals to income tax tribunals or even high courts.

However, we can reasonably expect Finance Minister Arun Jaitley to announce a very comfortable fiscal deficit situation for the 2017/18 financial year when he rises to present the budget on February 1. This would be largely though anticipated income tax gains from the deposits made in banks. The minister is already setting the mood by pointing to robust growth in tax collections..

A low deficit will give the government enough elbow room to play shots – be it in the form of lower taxes for citizens, populist schemes, recapitalising banks scarred by bad loans or fresh spending on infrastructure.

A Robin Hood-like transfer of a big chunk of fiscal gains to the poor holders of Jan Dhan Yojana may be the most romantic outcome of the demonetisation drive.

This, in fact, may become a political necessity because the government has been bitten badly on two fronts. A fall in the current year’s GDP growth resulting from the demonetisation is an economic scar, while stories of millions of industrial workers and farm hands suffering due to the cash squeeze resulting from demonetisation spell political wounds ahead of state elections in UP and Punjab.

To this we may add the image damage caused by a slew of ad-hoc measures linked to the drive – the latest of which is a Quixotic ordinance to fine those who may be caught with more than 10 outlawed notes. The international media has hit Modi where it hurts.

The government also faces a 5-judge bench of the Supreme Court on the Constitutional validity of the demonetisation. In the judiciary and in election rallies, the after-effects of demonetisation may drag on – long after the queues in front of ATMs vanish. That would make it seem like a drawn test match, not a one-day sizzler.

(The writer is a senior journalist. He tweets as @madversity)

First Published On : Dec 30, 2016 07:56 IST

Get in line: Friday is your last chance to deposit old Rs 500, 1000 notes

<!– /11440465/Dna_Article_Middle_300x250_BTF –>The 50-day deadline to deposit the old Rs 500/1,000 notes in banks comes to an end on Friday but the cash crunch and queues before ATMs are likely to continue for some more time as currency printing presses have failed to meet the huge demand for new bills.People, however, will still have time to exchange the currency notes at designated RBI counters till March 31 after giving valid reasons for not depositing defunct notes in their accounts by December 30.The government is also planning to come out with an Ordinance making possession of old Rs 500/1,000 notes beyond a specified limit for numismatic purposes illegal and punishable.Prime Minister Narendra Modi in a surprise announcement on November 8 declared the old Rs 500 and 1,000 notes invalid.The banks started accepting deposits in scrapped notes from November 10. However, a very few ATMs opened on November 11, as most of the machines had to be recalibrated, for people to get cash which was available in Rs 2,000 denomination.Saddled with cash crunch, banks resorted to rationing of valid currency notes and fixed a withdrawal limit of Rs 24,000 per account in a week. Although the overall situation at banks has improved, ATMs still have to do some catching up. Many cash vending machines are still out of cash even after 50 days since demonetization.The government move was sharply criticised by the Opposition parties led by Congress and TMC. With every passing day, the number of circulars from the government or the Reserve Bank kept on rising that led to confusion among bankers as well as the public.Bankers believe that restrictions on withdrawal of cash from banks and ATMs are likely to continue beyond December 30.After the demonetization, the government had fixed a limit of Rs 24,000 per week on withdrawal from bank accounts and Rs 2,500 per day from ATMs in view of the currency crunch.The government and the RBI has not specified when the restrictions will be withdrawn. Finance Secretary Ashok Lavasa had said the withdrawal cap would be reviewed after December 30.

RBI refuses to give reasons behind demonetisation

New Delhi: Why were Rs 1000 and Rs 500 notes demonetised by the government? Fifty days after the government announced that these notes would cease to be legal tender, Reserve Bank of India feels that the reasons behind the sudden announcement cannot be made public.

The monetary policy regulator also refused to give any details about the time it will take to replenish the currency notes.

Reserve Bank of India (RBI). ReutersReserve Bank of India (RBI). Reuters

Reserve Bank of India (RBI). Reuters

“The query is in the nature of seeking future date of an event which is not defined as information as per Section 2(f) of the RTI Act,” RBI said in response to an RTI query. The Bankers’ Bank refused to disclose reasons behind the demonetisation of about Rs 20 lakh crore of currency in the country citing Section 8(1)(a) of the Right to Information Act.

The section states, “Information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence.”

Denying the information sought in the RTI application, the RBI did not give any reasons as to how exemption would apply in the given case
as the decision was already taken and there was no way that disclosure of information would have fit in any of the reasons cited in section
8(1)(a) of the RTI Act.

“The clause of public interest would apply where exemption clause applies on the information sought by an applicant. In the present case,
the information sought does not attract any exemption clause,” former Central Information Commissioner Shailesh Gandhi told PTI.

He said law is very clear that when a public authority rejects to disclose an information it must give clear reasons as to how the exemption clause would apply in the given case.

Recently, it had refused to allow access to minutes of meetings held to decide on the issue of demonetisation of Rs 1000 and Rs 500
notes announced by Prime Minister Narendra Modi on November 8.

Responding to an RTI application filed by activist Venkatesh Nayak, the Banker’s Bank refused to disclose the minutes of the crucial
meetings of Central Board of Directors on the issue of demonetisation citing section 8(1)(a) of the transparency law.

Nayak said he will appeal against the decision, adding, while confidentiality prior to the making of the demonetisation decision is
understandable, continued secrecy after the implementation of the decision is difficult to understand when crores of Indians are facing
difficulties due to the shortage of cash in the economy.

He said the refusal to disclose the minutes of the board meeting where the decision was taken is perplexing to say the very least.
Former Information Commissioner Shailesh Gandhi also underlined that RBI has created an in­house “disclosure policy” which is against
the letter and spirit of the RTI Act.

Gandhi has also filed a complaint before Central Information Commission against RBI for adopting the policy.

First Published On : Dec 29, 2016 20:03 IST

Note ban policy: RBI’s autonomy under threat, say experts

New Delhi: Has the Reserve Bank of India (RBI) under its new governor, Urjit Patel, surrendered its hard-fought autonomy? Many experts feel so, particularly after the manner in which Prime Minister Narendra Modi‘s government has handled the demonetisation drive.

Former Prime Minister Manmohan Singh, also a former governor of the RBI and a finance minister, lamented in Parliament recently that constant modifications in the country’s banking system following demonetisation was not good for the country or the RBI.

RBI Governor Urjit Patel. PTIRBI Governor Urjit Patel. PTI

RBI Governor Urjit Patel. PTI

“That reflects very poorly on the Prime Minister’s office, on the Finance Minister’s office and on the Reserve Bank of India,” he told the Rajya Sabha last month. “I’m very sorry the Reserve Bank of India has been exposed to this sort of criticism, which I think is fully justified.”

What is unclear in this whole exercise is how much say the country’s central bank — the apex monetary policy authority, established on April 1, 1935, following the enactment of the Reserve Bank of India Act, 1934 — had in the policy decision.

“The government said the RBI has recommended the demonetisation. I do not know whether the government has forced the RBI to ask or the RBI took the call on its own,” RBI’s former Deputy Governor K.C. Chakrabarty told IANS over phone from London.

“I’ll not be able to say (on RBI’s views being valued) unless the minutes of the board meet is shown,” he added, alluding to some interference by the government, since RBI’s position has always been against demonetisation.

“That was the consistent view of the Reserve Bank in the past,” Chakrabarty said.

In a reply to Bloomberg, on a right-to-information query, the apex bank said that the decision to withdraw the legal tender character of the Rs 1,000 and Rs 500 notes was taken by the RBI board at 5.30 p.m. on November 8 — less than three hours before Modi announced it to the country.

Overnight, Rs 15.44 lakh crore or 86 percent of the currency in circulation was declared illegal. Norms were announced by the Prime Minister on how people could deal with such currency in their possession — which were subsequently changed on an almost daily basis.

Regarding autonomy, Chakrabarty said: “You must understand the autonomy that the RBI was getting from the government was because the government was to give the autonomy to the institution. If the government does not want to give anybody autonomy, the RBI cannot do anything.”

West Bengal Finance Minister Amit Mitra was more direct.

“Most eminent people in India have been RBI governors, including the present governor (Urjit Patel). He is a good economist. Now the same autonomous institution has lost its teeth. It has been issuing notices and withdrawing notices as per government’s instructions,” Mitra told IANS.

“What is very dangerous regarding demonetisation has gone unnoticed. The deeper issue is that fundamental institutions of India of historic nature are being undermined and emasculated. Therefore, the faith in them by the people is under question today,” he added.

The money that was declared illegal is yet to be replaced in any substantial measure — at last count, the RBI said Rs 5.93 lakh crore of new Rs 2,000 and Rs 500 have been issued. Since November 10, most ATMs across the country have remained shut and those which do open their shutters run dry of cash very quickly. Bank cash counters have the same woes, despite restrictions on the amount that individuals or companies can withdraw.

Many bankers too seemed to have lost faith on the towering apex institution.

“Yes, the RBI seems to have lost its autonomy in the issue of demonetisation which has been totally mismanaged,” a chief executive of a bank told IANS, declining to be named.

“The RBI should have advised the government on the ground reality about withdrawing 86 percent of the currency notes in circulation and the logistical issues,” he added, suggesting that the central bank should have stuck to its ground.

In fact, Duvvuri Subbarao, former RBI Governor and Finance Secretary, has been rather candid about his relationship with the government and the finance minister (P. Chidambaram at that time) when he was at the helm at Mint Street, the headquarters of the RBI in Mumbai.

“Both have the same objective of growth, but RBI looks at long-term growth and the government looks at short term growth that results in different priorities for both. There is no way out,” Subbarao told IANS.

“It all depends on the chemistry between the finance minister and the governor,” he said.

But experts hope the question of autonomy could come under less pressure, now that a Monetary Policy Committee (MPC) has been named and has started functioning — with three representatives each from the government and the RBI, and the veto power with the Governor.

“I support formation of MPC, though it will curtail the decision-making powers of the RBI Governor,” said Subbarao. “The Governor will discuss and listen to all stakeholders in the committee, so he will not be solely responsible for the decision on interest rates.”

But some domain experts like M.R. Sivaraman, former Union Revenue Secretary and former Executive Director at the International Monetary Fund, don’t think demonetisation exercise, at least, reflects loss of the RBI’s autonomy. On the contrary, they feel it is RBI that should have handled the situation better.

“Demonetisation will curb black money, eliminate fake currency and bring out unaccounted cash stashed away into the banking system,” said former Infosys board member T.V. Mohandas Pai, dismissing suggestions about loss of independence.

First Published On : Dec 29, 2016 19:26 IST

RBI and its broken promise: Is there no sanctity to the promissory notes?

The draconian punishments announced for keeping more than 10 notes of demonetised currency including a four-year jail sentence seems to be a defence mechanism to discourage any trigger happy Public Interest Litigator from suing the Reserve Bank of India (RBI) for breaking its promise.

Every note carries the legend ‘I promise to pay the bearer the sum of…’ and the unilateral murder of these notes also leaves the RBI vulnerable to a breach of trust since the people were not party to the dissolution of the contractual obligation.

While illegally held notes or those that have been used for unlawful activities can be taxed and their holders penalised accordingly, the question that can be asked under the law is whether the promise still holds good.

Punish me as per the law but keep the written pledge.

Representational image. PTI

Representational image. PTI

In purely technical terms, going by the written pledge, the RBI is obligated to exchange every one of the notes with those of lesser denominations including coins because that is what it has said it will do.

But, wait a minute. Does it owe us an explanation and while it can be accused of clumsiness, is it legally within its rights to ‘renege’ on its agreement?

The promissory note has its antecedents in the gold standard when a note could be exchanged for precious metals and is based on the Bank of England’s monetary system. In fact, at one stage, every note had the name of the individual to which it was given as legal tender.

Today, the note has the signature of the governor of the Reserve Bank and under his assurance the note per se is neither black, white, laundered or, in any way, reduced in value vis a vis the promise written on it.

As a legal conundrum how would the RBI defend itself? By citing the greater good? By underscoring the criminal element in its war on the parallel economy? By submitting that the pledge was initially broken by the people who misused the note and therefore rendered the promise null and void.

Perhaps the RBI’s best bet is to state that the Indian currency note is not a promissory note as it was in the old days but is money like the coins and, therefore, not accountable legally if the promise is not kept.

If that be so and this argument will be the mainstay of the government’s stand why have the legend on the note at all along with the governor’s signature? Doesn’t it have any sanctity?

The government will say that it is a convention with no locus standi in the court of law.

Consequently, since there is a ‘for’ and an ‘against’ argument, the Rs 500 and Rs 1,000 notes that were demonetised each can have a day in court because its owner has had a pledge broken.

But it is a losing battle. Modern Indian currency is not officially seen as being a descendant of the old notes from the history books but just cash.

While most of us do not really care very much and will not do anything, one can question the premise that legally the RBI is duty-bound to honour every single note and see it as mutually exclusive from who owns it or what laws that the owner has broken.

The RBI, in simple terms, is not the police.

After all, if there is no value to the promise and the signature and the Indian currency is purely money why repeat this pompous commitment on the new notes.

Would this make for a stronger petition one cannot say but it is an interesting situation.

Problem there is that in no place on the note does it mention conditions under which this promise can be negated.

First Published On : Dec 29, 2016 14:05 IST

Can Viral Acharya, RBI’s new deputy governor solve Mint Street’s communication block?

It’s been only a few hours since his name was announced as the new deputy governor of the Reserve Bank of India (RBI) in charge of monetary policy, but Viral Acharya is already a star. Media reports describe him as ‘Poor man’s Rajan’, picking the phrase from one of his old interviews, while some wrote about how the cricketer, singer and poet Acharya also has a music album to his credit.

The newfound stardom and fanfare accompanying Acharya in Indian media reminds one the initial days of Raghuram Rajan, former RBI governor, who was often called as a ‘rock star’ governor of Mint Street and James Bond who’s put the “sex” back into the Sensex’. At 42, Acharya, is the youngest deputy governor of the RBI. One needn’t be surprised if he morphs into a ‘junior rock star’ in media.

Viral Acharya - RBI Deputy Governor. Image courtesy - NYU-Stern.Viral Acharya - RBI Deputy Governor. Image courtesy - NYU-Stern.

Viral Acharya – RBI Deputy Governor. Image courtesy – NYU-Stern.

But once the welcome party is over, there is a trial by fire awaiting Acharya, who is entering the RBI at a time when the economy is fighting a self-imposed demonetisation crisis and the central bank itself is fighting a major trust deficit and credibility crisis, due to the way it has handled the Modi government’s decision on the evening of 8 November to demonetise Rs 500 and Rs 1,000 currency notes.

Acharya needs to hit the ground running making the RBI’s voice heard in the monetary policy committee (MPC) on the course of interest rates in a challenging economic scenario. Since there is already an MPC with experts in place, Acharya’s task wouldn’t be too tough as in the old days when the monetary policy was solely the central bank’s responsibility.

Nevertheless, there is likely to be pressure from the ruling political dispensation for steeper rate cuts in the backdrop of a sharp decline in economic growth due to the demonetisation-induced cash crunch.

The RBI itself has lowered the GDP forecast for the fiscal year 2017 to 7.1 percent from 7.6 per cent while forecasters have gone even more pessimistic forecasts (one even predicted 3.5 percent for current year).

Acharya isn’t a big fan of ultra-loose monetary policies though. He believes such a policy stance ,when introduced in a weak banking system, can turn out to be disastrous. In an interview given to Bloomberg Quint, Acharya had said, “We are yet struggling to figure out what the global economies are from the ultra-loose monetary policy. Whereas, now we are seeing emerging evidence of the unintended consequences that these policies have had. So, the biggest problem that I worry with low interest rates is when parts of your banking sectors aren’t healthy; it’s a recipe for disaster.” This was in the global context, but applies to India as well.

On the bad loan issue, one of the big headaches for India’s policymakers, Acharya had made two important remarks in the same interview.

First, to hive off bad loans into a separate entity. Acharya had said that Indian banking system need to create a bad-loan bank to separate the good assets from the bad. “I am absolutely proposing, either explicitly or implicitly, that we separate the unhealthy parts of the troubled banks from the healthy parts,” Acharya said.

Secondly, he warned that taking profit from the RBI and using it for the recapitalisation of state-run banks is a solution to the capital problems of India’s PSU banks.

“I don’t think half-baked solutions like taking the RBI’s profits and putting them into public sector banks is the way to go. I think that is just like putting on a band aid and actually it’s a pretty bad band aid in my opinion, because it, kind of, distances the fiscal authority from the monetary, it reduces the distance of the two. It, kind of, almost says that central bank should generate profit because you have to recapitalise the public sector. Everything smells wrong about it.”

Interestingly, one of the thought processes within the Modi government when it announced demonetisation was that the exercise will create some fiscal boost in the form of a ‘windfall’ profit from the RBI when its currency liability goes down.

The idea didn’t work since most of the money demonetised returned to the banking system and RBI governor Urjit Patel clarified that there is no such plan to transfer a one-time surplus to the government on the cards. India’s PSU banks are reeling under heavy bad-loan burden (totalling Rs 6 lakh crore as on September) and need huge capital to meet their Basel-III credit requirements, credit expansion needs and bad loan provisioning.

In a research paper co-authored with Krishnamurthy V. Subramanian of Indian School of Business — State intervention in banking: the relative health of Indian public sector and private sector bank — Acharya had said that many of the problems faced by Indian public sector banks are due to their lack of efficient human resources (he cited the P J Nayak committee report here), their inability to adapt to a rapidly changing technology and the issue of dual regulation of these banks by both the RBI and finance ministry. In the paper, Acharya strongly advocated that in the due course some of the public sector banks will have to by privatised.

“Over the long run, some of the public sector banks can be privatised or their assets reallocated. Some of them could be acquired by the relatively well-capitalised private sector firms; the ones with worst asset quality could be wound down; and, greater entry of smaller and newer banks can be enabled to yet maintain healthy levels of competition,” Acharya said.

As Patel’s deputy in charge of monetary policy, there is no clarity whether Acharya will have a say in the bad loan resolution issue. But, if he continues to argue for some of the above recommendations in the past, he may run into trouble with the government, especially on the issue of using RBI profit to recapitalise state-run banks.

But, beyond these two issues — monetary policy and banking sector NPAs — what one needs to watch is whether Acharya can offer a solution to the communication block the Reserve Bank is suffering ever since Patel took over as RBI governor. Over the years, especially during the tenure of Raghuram Rajan, the RBI has taken serious efforts to improve the central bank’s communication to the public also using public engagements of the RBI top brass to converse and clarify key policy decisions with various stakeholders. This was done with the assessment that effective communication is equally critical for a central bank as much as taking policy decisions.

But, arguably, the RBI under Patel has been a failure to carry forward this effort, especially during the demonetisation rollout. Former RBI deputy governor, Usha Thorat, in a column in The Indian Express, criticised the RBI for not communicating to the desired extent on certain critical aspects of demonetisation. “The RBI top management must communicate more through the media and speaking opportunities. This is necessary in the interest of transparency and credibility. It generates confidence that the RBI believes in honest communication,” Thorat said. Governor Patel’s prolonged silence since 8 November, despite uncertainty on cash crunch gripping the public, had attracted strong criticism.

Can Acharya, an articulate academic, fill the void of the effective communicator in the central bank? “Perhaps he can,” said Gaurav Kapur, an independent economist. “ Not just on the demonetisation issue, but on other policy decisions as well. Acharya can be the person to communicate the RBI’s policy decisions more effectively, which was largely missing during the demonetisation episode,” Kapur said.

Over to you Mr Acharya.

First Published On : Dec 29, 2016 12:38 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

Withdrawal cap may be eased to Rs 4,000/day, Rs 40,000/week: sources

<!– /11440465/Dna_Article_Middle_300x250_BTF –>As Prime Minister Narendra Modi gets ready to address the nation after almost 50 days into demonetization on December 30, a reliable source told DNA that the government was seriously considering relaxing current restrictions on withdrawals from banks and ATMs from Rs 2,500 per day and Rs 24,000 per week to Rs 4,000 per day and Rs 40,000 per week respectively.Modi had sought 50 days to normalise the liquidity situation after he made Rs 500 and Rs 1,000 notes illegal from November 8 midnight.A source in the government, who spoke on condition of anonymity, said since the shortage of cash continued to persist, the restriction on withdrawal may not be completely removed but would be eased.”Today, for instance, the restriction is Rs 24,000 per week and Rs 2,500 per day; they might increase that to Rs 4,000 per day and Rs 40,000 per week, but nevertheless, will continue with the restrictions. All of this is expected to be announced by the PM on December 30 evening. He is planning an address (to the nation) at 8 pm in which he is going to connect what he said on November 8 and ask countrymen to be patient,” he said.Also, the government is contemplating an ordinance to restrict holding of banned notes and penalising their possession of beyond a certain limit after December 30. However, the ordinance is likely to be issued only after the liquidity situation improves. “That (ordinance) is being discussed very seriously, but there are two specific challenges. One is that in terms of the RBI (Reserve Bank of India) notification issued on November 8 that even after January 1 people have time till March 31 to deposit with RBI. Technically the ordinance can’t be issued with effect from January 1 because if they say that holding the currency is illegal after January 1, then those who would have planned to deposit it with the RBI (after December 30) will not have that window (given by the government earlier),” said a source.The second issue was shortage of liquidity in the economy; “even today, the country is largely running on Rs 2,000 note. Other denomination notes have not yet been made available and the process of contracting for new currency notes has just started. The problem is not going to vanish from first week of January,” he said.According to the source, tenders for printing of new currency notes of Rs 500 and Rs 2,000 were issued from December 22. “The government can’t just call anybody and ask them to do it. They have to buy the paper, the ink, open tender, and then do it,” he said.Also, the government does not want to take any unpopular decision. “With the after-effects of demonetization still lingering, it does not want to become more unpopular—saying on one hand that holding old money is illegal and you can be penalised, while on the other it still cannot meet the currency demand,” he said.

Beware! Ordinance likely to impose penalty for holding old Rs 500, Rs1000 notes post Dec 30

<!– /11440465/Dna_Article_Middle_300x250_BTF –>The government is understood to be mulling an ordinance to impose penalties on anyone possessing the junked Rs 500 and Rs 1000 notes beyond December 30 when the deadline to deposit them in banks expires.There was no official word on the move which is likely to come up before the Cabinet on Wednesday but sources said penalties may be imposed on anyone holding more than 10 notes each of the old currency after December 30. The ordinance may also 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.The government had while announcing the demonetization 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 till Friday to deposit the holding in their accounts.For those depositing any accounted funds, or black money, it has offered them an amnesty provided they paid 50 per cent of it as tax and penalties and parked a quarter of it in a zero-interest bearing deposit for four years.Reports said that there could be a cap of holding no more than 10 notes of each after December 30 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, but there was no confirmation.Holders of such currency have an option to deposit them in RBI by March 31 but even that period may be curtailed, they said. 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.

Demonetisation: Govt mulling ordinance to penalise those holding junked notes beyond 30 December

New Delh: The government is understood to be mulling an ordinance to impose penalties on anyone possessing the junked Rs 500 and Rs 1000 notes beyond 30 December when the deadline to deposit them in banks expires.

There was no official word on the move which is likely to come up before the Cabinet on Wednesday but sources said penalties may be imposed on anyone holding more than 10 notes each of the old currency after 30 December.

Representational image. PTI

Representational image. PTI

The ordinance may also 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.

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 till Friday to deposit the holding in their accounts.

For those depositing any accounted funds, or black money, it has offered them an amnesty provided they paid 50 per cent of it as tax and penalties and parked a quarter of it in a zero-interest bearing deposit for four years. Reports said that there could be a cap of holding no more than 10 notes of each after December 30 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, but there was no confirmation.

Holders of such currency have an option to deposit them in RBI by March 31 but even that period may be curtailed, they said.

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.

First Published On : Dec 26, 2016 21:50 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 Telanagana

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

Fake news in review: Here are the top 10 forwards Indians (almost) believed in 2016

By Alison Saldanha

From currency to salt–very little escaped the reach of fake or fabricated news in 2016. Rumours spread from WhatsApp and other social media into the mainstream media. Institutions such as the United Nations Educational, Scientific and Cultural Organization (Unesco), and the Reserve Bank of India (RBI) had to step in and tell us what was true. Even Facebook and Google, two of the world’s biggest Internet companies, sat up and took notice.

Such news can have widespread reach: India is one of the biggest markets for several social media and communication companies–it has 160 million of WhatsApp’s one billion-plus monthly active users, 148 million Facebook users, and over 22 million Twitter accounts.

The potency of fabricated news came into focus after the 2016 US presidential elections. In the run-up to the ballot, fake news on the elections drew more engagement on Facebook than top-performing stories from major news outlets such as The New York Times, CNN, NBC News, or The Wall Street Journal, this BuzzFeed News analysis found. Other countries witnessed the rise of fake news too, according to this Guardian report, rendering it a global phenomenon in 2016.

Here are some of the most popular Indian fake news stories of 2016:

Unesco declares PM Modi best Prime Minister

Unesco has been one of the primary alleged sources of fake news in India. In June 2016, fake news broke out on WhatsApp groups, and other social media, that the UN cultural agency had awarded Prime Minister Narendra Modi the title of best prime minister in the world.

That rumour is still circulating on social media:

World billiards champion Pankaj Advani shared the news on Twitter congratulating PM Modi.

After media organisations pointed out the news was a hoax, Twitterati trolled Advani leading him to post this rebuttal:

Unesco declares Jana Gana Mana best national anthem

Another favourite Indian rumour involving Unesco is the claim that India’s national anthem–Jana Gana Mana–has been declared the “Best National Anthem In The World”. The fake news started in 2008 through email and then caught the UN agency’s attention. “We are aware of several blogs in India reporting this story, but can assure you that Unesco has made no such announcement concerning the anthem of India or any country,” a Unesco official told India Today in 2008.

Circulation of the rumour peaked around India’s Independence Day in 2016:

Unesco declares new Rs 2,000 note best currency in the world

Another fake Unesco certificate for India touched upon the notebandi crisis, as messages claimed the organisation had certified the new Rs 2,000 note as the “best currency in the world”. The message, shared widely on WhatsApp, claimed “Dr. Saurabh Mukherjee, head of cultural awareness department of Unesco announced this to media.”

The rumours caught the eye of the BBC, which reported that “thousands” of Indian WhatsApp users had “forwarded the message along with joyful emojis”.

New notes have a GPS chip to detect black money

Another notebandi rumour proliferated when PM Modi announced the withdrawal of old Rs 1,000 and Rs 500 notes on 8 November, 2016. In less than an hour, rumours circulating on WhatsApp of a nano geo-positioning system (GPS) tracking device embedded in the new Rs 2,000 notes gained traction. This chip, the messages said, would alert authorities if black money was hoarded .

The nano-GPS chip does not need any power source, the forward said, according to this Firstpost report. “It only acts as a signal reflector. When a Satellite sends a signal requesting location the NGC reflects back the signal from the location, giving precise location coordinates, and the serial number of the currency back to the satellite, this way every chip-embedded currency can be easily tracked & located even if it is kept 120 meters below ground level. The NGC can’t be tampered with or removed without damaging the currency note.” Mobile currency-scanner apps emerged claiming the app can scan new notes and have these authenticated by RBI, according to this Firstpost report.

The RBI has clarified the new notes contain security features such as latent images, coloured strip security threads, watermarks etc, but they do not have a chip installed, according to this The Hindu report.

Still, rumours are rampant. Recent news of authorities tracing hoards of illegally-held new notes seems to have further fanned rumours, and more YouTube videos explaining the placement of chips in the new notes are circulating on social media.

New notes have radioactive ink

Notebandi provided more fodder for fake news. Earlier this month, rumours began circulating that the RBI was using radioactive ink to print new Rs 2,000 and Rs 500 notes. The new notes include a “radioactive isotope of phosphorous (P32), which has 15 protons and 17 neutrons”. The fake news claimed the income-tax department was using the isotope to trace large quantities of cash held at a particular spot. The trace amounts of radioactive isotope employed in this exercise were not harmful to humans, according to WhatsApp messages, as FirstPost reported.

Even some banks fell prey to notebandi-related rumours, and were called out on Twitter.

WhatsApp profile pictures can be used by IS for terror activities

A WhatsApp forward, supposedly sent by the Delhi police commissioner, requested “moms” and “sisters” to delete their WhatsApp profile pictures for security purposes. These pictures were supposedly vulnerable to misuse by the terror group Islamic State of Iraq and Syria (IS), whose hackers had access to citizens’ details and could easily steal their virtual identity, according to the forwarded message. The message further claimed that WhatsApp’s CEO had requested users do this for 20-25 days, while their team worked on enhancing the messaging application’s security features.

The message was signed off by an AK Mittal, who claimed to be Delhi’s police commissioner, but the phone number mentioned in the message had since been marked as “blacklisted” in Truecaller, which a caller identification application, according to this Indian Express report.

A Reddit thread discussing the WhatsApp message is here.

 RBI declares the Rs 10 coin invalid

Months before notebandi was announced, the message that the RBI had declared the Rs 10 coin invalid spread through WhatsApp, particularly to areas in Agra, Delhi and Meerut.

This confusion led shopkeepers, kiosk-owners, auto-rickshaw drivers and vendors to refuse the coins, according to this Hindustan Times report from September 2016.

In June 2016, the RBI had issued a new Rs 10 coin. At that time, rumours had spread that the old coins would now no longer be valid. WhatsApp messages made other claims too–two kinds of counterfeit coins have flooded the market, and that the RBI was phasing the coins out because of widespread circulation of fake currency–according to this Business Standard report. The RBI stepped in and clarified that the coins were indeed legal tender and those refusing to accept the currency could face legal action.

After the withdrawal of Rs 14 lakh crore–the value of bank notes withdrawn on November 8, 2016–the rumour resurfaced in Odisha, spreading panic and adding to the currency chaos as vendors refused to accept the coins, according to this NDTV report from November 2016.

Jayalalithaa’s ‘secret daughter’ and heir lives in the US

Soon after the death of former Tamil Nadu Chief Minister J Jayalalithaa, fake news and photos of a secret daughter went viral on WhatsApp and social media. The message alleged that the woman in the photograph was Jayalalithaa’s daughter, who lived somewhere in the US in anonymity.

As it turns out, the woman in the photograph was not connected to Jayalalithaa and lived in Australia, according to popular singer and TV show host Chinmayi Sripada, who took to Facebook to dispel the rumours.

“She belongs to the family of renowned Mridangam Vidwan V Balaji,” wrote Sripada. Musician Trivandrum V Balaji also clarified that the woman in the photo was his sister-in-law.

Salt shortage in India

WhatsApp messages of a salt shortage (despite a 7,517 km coastline) in November 2016 triggered panic buying at markets past midnight, and caused a four-fold price-rise in some parts of the country. Western Uttar Pradesh, Delhi, Maharashtra and Hyderabad were particularly affected by this bit of fake news, said news reports. The subsequent chaos to stock up on the essential commodity led to the death of a woman in Kanpur, while police baton-charged crowds and stopped mobs from looting grocery shops, according to this India Today report.

The government issued a clarification denying any shortage of the commodity. “We monitor the prices of 22 essential commodities on daily basis. As per the prices reported by centres from across the country, there has been no increase in price of salt whatsoever,” the department of consumer affairs said in a statement, as quoted in this The Times of India report.

Speaking at an event in Goa, PM Modi claimed the fake news was being circulated by “vested interests hurt by demonetization”, according to this IANS report. The prime minister’s claim is unverified.

“Nehru Govt has stood like a Banyan Tree”: Mark Tully

Fake news claiming former BBC India bureau chief Mark Tully called for support to Prime Minister Narendra Modi’s government, while describing India’s first prime minister Jawaharlal Nehru’s government as standing “like a banyan tree, overshadowing the people and the institutions of India”, went viral on social media earlier this month. “Nothing grows under the banyan tree,” the message added.

The fake Facebook post reads: “For a year or so we may witness more of Dadris, more of Kaniyahas, more of Owaisi style shouting but finally if the *Society keeps its cool, acts maturely* and continues to perform we will sail through and the old forces will die a natural death.” The post claimed Tully made these statements while discussing “changes happening in MODI’S regime” in his new book, No Full Stops in India.

Tully rebutted the claims of the post in this Hindustan Times column, though the post still appears to be in circulation. Not everyone believed the statements were authentic but some did ask for confirmation, he wrote: “But some did think they were authentic, a few even congratulated me. The fact that people could believe such obvious fakes were genuine indicates the power of fake news…If the reports had been more credible, less absurd, my credibility would have been severely damaged.”

Indiaspend.com is a data-driven, public-interest journalism non-profit


First Published On : Dec 26, 2016 09:28 IST

Demonetisation effect: As tourists stay away, note ban puts 50 million livelihoods at risk

By Mukta Patil

Anjuna (Goa): Raju Lakhani’s beachside restaurant here at this popular tourist strip in north Goa should have been packed this time of the year. But the tables at Moon Star are empty, and the restaurateur is a worried man.

“We have no customers,” he said. “Almost 90 percent of tourists are leaving because of the inconvenience caused by demonetisation.”

Demonetisation has caused a slow down in the tourism industry. Image courtesy: Indiaspend/Mukta Patil

Demonetisation has caused a slowdown in the tourism industry. Image courtesy: Indiaspend/Mukta Patil

Lakhani said he now has no choice but to lay off workers. He is one of Goa’s many restaurant owners who are feeling the brunt of what is referred to as notebandi — the colloquial term for the ban on India’s Rs 500 and Rs 1,000 notes, 86 percent by value of all bank notes.

At 2.8 percent, the travel and tourism sector in India grew faster last year than it did worldwide (2.3 percent). It contributed to 6.3 percent of the country’s gross domestic product (GDP)–including direct, indirect and induced contributions — and translated to Rs 8.3 lakh crore in 2015, according to this 2016 report by the World Trade And Tourism Council (WTTC), a forum for the travel and tourism industry.

Tourism is also a labour-intensive sector, creating 78 jobs for every million rupees invested, according to tourism ministry data. The agriculture sector creates 45 jobs for the same investment, and manufacturing, only 18.

Ever since 2009, the share of tourism in employment has consistently been over 10% of India’s workforce of 500 million workers. This means that the sector employs almost 50 million people–more than the population of Colombia.

Tourist woes: Cash crunch, long queues, exchange limits

In 2015, the number of foreign tourists visiting India was over 8 million, and earned the country foreign exchange earnings of almost Rs 1.35 lakh crore, a growth of 9.6 percent over 2014, according to tourism ministry data.

But if travel entrepreneurs like Lakhani start scaling down their businesses, all this could change.

In the weeks following notebandi, it was reported that foreign tourists were being inconvenienced. Bookings also fell rapidly in Kerala and Karnataka.

Will King and Hallam Baker-Howard, both UK citizens in their early 20s, landed in Mumbai on 28 November 2016 — 20 days after the imposition of notebandi. They found themselves in the midst of a cash crunch.

“We went from ATM to ATM in Mumbai during our first three days in India and there were huge lines snaking outside all of them,” King recounted. “Once, after waiting for 45 minutes, we reached the front of the queue, and the cash ran out.”

Governments of several countries, including the UK, Australia, and Canada, have issued travel advisories to their citizens about the money trouble they might encounter in India.

“It’s not just that we have to wait in line. I’m being charged a fee for every transaction of almost Rs 120 (1.5 British pounds),” said Baker-Howard. “Earlier, I would have withdrawn a large amount but now I have to do so every day and this is costing me a lot of money for no reason.”

The Reserve Bank of India (RBI) has said that ATM charges will be waived for customers until December 30, 2016, but that does not apply to foreign bank-account holders like Baker-Howard.

img class=”size-full wp-image-3169906″ src=”http://s4.firstpost.in/wp-content/uploads/2016/12/tourism_anjuna_Indiaspend_Onetime-use-only.jpg” alt=”Anjuna beach, in north Goa, should have been full with tourists during this time of the year. But with tourists leaving earlier than expected due to the inconvenience caused by notebandi

Anjuna beach, in north Goa, should have been full with tourists during this time of the year. But with tourists leaving earlier than expected due to the inconvenience caused by notebandi

The cap on withdrawal has affected not only incoming tourists, but also outgoing Indians, as Scroll reported on 2 December 2016. Visitors were unable to withdraw more than Rs 2,000 in foreign currency, which is not adequate.

RBI regulations also declared that foreign tourists could only exchange currency worth upto Rs 5,000 a week until December 15, 2016. However, before the move,  foreign passport holders were able to exchange as much as $3,000 (Rs 200,000). This means that visiting foreigners can now only exchange 2.5% of what they could before notebandi.

Tourists were, however, allowed to use a “pre-paid instrument” in exchange for foreign currency tendered. But this does not help those who have run out of foreign currency. Tourists leaving the country post-demonetisation have been unable to change more than Rs 5,000 into their own currency, although the average demand for re-encashment is Rs 20,400.

Travellers willing to spend, but where is the change?

Wednesdays at Anjuna are usually a crowded affair with a weekly flea market underway. The lanes are lined with stalls selling everything from clothes, handicrafts, and jewellery to spices, curios, and food. On 14 December 2016, the whole market was deserted.

Abdul Qayoom and Ahmed Bhat sit outside A-Z Handicrafts waiting for customers. They have applied for a swipe machine so they can accept card payments. However, their requests have been repeatedly turned down for lack of residence proof.

Over 35% of tourists travel to India for leisure, according to 2010 tourism ministry data.

“People come here to spend their own money but they cannot access it,” said Qayoom. “This is ridiculous.”

Shack owners mostly set up shop during peak season and operate in cash. However, some, like the H2O bar in Calangute and Sunset Bar in Siolim, have ordered swipe machines. These are yet to arrive.


Indiaspend.com is a data-driven, public-interest journalism non-profit

First Published On : Dec 23, 2016 10:00 IST

Demonetisation: Rising discomfort between banks, customers could spoil Modi’s well-intentioned move

Pradhan Mantri Jan Dhan Yojna (PMJDY) announced by the Prime Minister Narendra Modi from ramparts of the Red Fort on 15 August, 2014 was by all measure the most ambitious financial scheme launched post Independence. Goalpost set up by the Prime Minister was simple: bring the entire unbanked population under formal banking net by opening at least one bank account for each household in the country.

The initial target of opening 7.5 crore new accounts through regular brick-and-mortar branches was met before the deadline. In January 2015, in less than five months, 11.5 crore accounts were opened under Jan Dhan Yojana. The figures fetched the government Guinness Book of World Records entry for opening the maximum number of bank accounts in the shortest possible time.

But along with this motivating figure, serious concerns were also raised over the non-operational or zero balance accounts. Out of the total 11.5 crore accounts opened only 28 percent were operational.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

At that time Finance Minister Arun Jaitley, while speaking on the issue of zero-balance accounts, had said that direct benefit transfer would ensure that non-operational accounts will be made opeartive in coming times.

That happened to a great extent. Although several accounts were made operational, the usage of core banking services were not instilled to a major extent among the people at large.

As of now under the scheme 25.98 crore accounts were opened till 14 December. According to official statistics 100 percent household coverage in majority of the states have been achieved.

Now consider this: According to an official data 23.22 percent of the accounts are still having zero balance. The problem with these large number of zero-balance accounts was mainly due to lack of constructive communication among bankers and its new clients.

As stated by the vision document of the PMJDY the plan envisaged “universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit, insurance and pension facility. In addition, the beneficiaries would get RuPay Debit card having inbuilt accident insurance cover of Rs 1 lakh”. Another additional feature in the scheme was Rs 5,000 overdraft facility for Aadhar-linked accounts.

The reason for the persisting existence of the zero-balance accounts is simple: people still lacked banking habits and the government and bankers to a greater extent stressed on additional benefits PMJDY provided in the form of accident insurance cover of Rs 1 lakh and Rs 5,000 overdraft facility.

Talking to host of beneficiaries it became evident that in most of the cases they opened the bank account with an intention of getting additional benefits. Benefits being part of the formal banking structure was hardly a motivation in most of the cases. And to the greater extent it was in the manner in which bankers choose to motivate people for opening the bank accounts.

In the post-demonetisation period the same lack of communication and miscommunication is creating confusion among people. And it is being accentuated by the repeated change in rules regarding deposit and withdrawal of the demonetised currency notes.

Reserve Bank of India (RBI) in a circular on 19 December said in the remaining days of this month, one can make deposits in Rs 500 and Rs 1,000 notes in excess of Rs 5,000 only once per account and if anybody wants to deposit cash in the banned currency in excess of that amount, he will have to explain in the presence of at least two officers on why didn’t he do it earlier. Even if the deposits are made in small amounts multiple times, and add up to the magic number of Rs 5,000, the person stands exposed to questions.

A day after the RBI circular, Finance Minister Arun Jaitley clarified that no questions will be asked if any amount of old currency is deposited in one go, but repeated deposits may provoke queries.

The Business Standard report quoted Jaitley saying, “If they go and deposit with bank any amount of currency no questions are going to be asked to them and therefore the 5,000 rupee 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”.

In spite of this clarification in many places banks are refusing to accept any amount exceeding Rs 5000. A report published in Business Line states, “Consumers across the country were complaining that banks were refusing to take deposits even after giving detailed explanations. The new rules say that banks should accept the demonetised notes in excess of ₹5,000 only once and that too after the depositor has been questioned by two officials”

Since the demonetisation banks across the country are defying the orders issued by the RBI. In many smaller towns and cities, banks were seen categorically rejecting the cheques even with the permissible Rs 24,000 withdrawal amount. Arbitrary rationing was a common place in banks. The exception that Rs 2.5 lakh could be withdrawn by the families organising a wedding, was in many cases not honoured by the banks.

While the launch and successful meeting of set targets under PMJDY was commendable, mistaking it for a resilient and robust banking system was a fallacy that lays exposed in the current demonetisation process. In PMJDY the opening of crore accounts was made possible because largely people saw it as a dole out, where they did not have to incur any expenses. The fact that business correspondents (BC) and bank branches through camps and awareness drive reached out to people in large number that helped PMJDY achieve its target. But then the lack of communication between the bankers and their new found clients rendered the entire exercise futile to a greater extent as majority of the people were not using their accounts as reflected in the large number of zero-balance accounts.

For any financial decision to succeed it is required that people understand its intent and its procedural implementation. In the current demonetisation drive while the intent is clear to any objective observer, it is its implementation that is creating confusion which in turn is getting accentuated due to lack of communication between bankers and its clients. Communicating in clear terms is the only way that post-demonetisation confusion can be tackled. Any miscommunication fails the very purpose of the most well-intentioned move as implementation of PMJDY proves.

First Published On : Dec 22, 2016 12:05 IST

Tamil Nadu: CBI arrests J Sekar Reddy in Rs 170 Crore cash seizure case, probes links with TN chief secy’s sons

New Delhi: CBI on Wednesday arrested businessman J Sekar Reddy and his associate K Srinivasulu after Income Tax searches at his residence and office in Chennai resulted in seizure of 127 kg of gold and over Rs 170 crore in cash post demonetisation.

CBI sources said his links with the son of Tamil Nadu Chief Secretary Nadu P Rama Mohana Rao are also under the scanner of I-T department as it is believed that Reddy, a contractor, allegedly received his help to get state-wide sand mining contract.

Representational image. IBNliveRepresentational image. IBNlive

Representational image. IBNlive

Rao’s premises are being searched by I-T department on Wednesday.

CBI has registered a case of criminal conspiracy and cheating under Indian Penal Code besides provisions of Prevention of Corruption Act against Reddy and his two associates for conversion of currency in violation of RBI norms, the sources said.

They said it was alleged that I-T department searches had resulted in seizure of over Rs 170 crore in cash which included newly-introduced notes of Rs 2,000 worth Rs 34 crore (seized in two different occasions) besides 127 kg gold from him and his associates Srinivasa Reddy and Prem Kumar.

CBI case is related to seizure of Rs 24 crore of new currency notes from a Tata Ace load vehicle belonging to a Vellore resident, Rishi Kumar, on 9 December following searches at Reddy’s residence in Chennai.

“Reddy and his associates had, with the help of unknown public servants of different banks, converted the unauthorised cash held by them in old currency notes, thereby depriving the public in enforcing their right,” CBI alleged in its FIR.

It said the bank officials, who are allegedly entrusted with the distribution of new currency notes as per instructions of Reserve Bank of India, defied the RBI instructions and helped Reddy for a “consideration”.

“Reddy, Prem Kumar and K Srinivasulu, had in conspiracy with unknown bank officials and public servants converted unaccounted cash held by them in the form of old currency notes to new Rs 2,000 currency notes, cheating the government of India,” it alleged.

First Published On : Dec 21, 2016 19:38 IST

DNA Evening Must Reads: Rahul Gandhi’s allegations against PM Modi, Sunny Leone sizzles in ‘Raees’, and more

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Rahul Gandhi claims PM Modi took bribes from Sahara and Birla, BJP laughs off allegationsRahul Gandhi alleged that Narendra Modi as Gujarat Chief Minister had taken money from Sahara and Birla groups and demanded an independent inquiry into it, a charge BJP rejected as an attempt to divert attention from the AgustaWestland probe in which the names of Congress leaders and the “family” were coming up. Read more hereIncome Tax raids on Tamil Nadu Chief Secretary: BJP rejects Mamata’s criticism, denies any ‘vindictive action’Rebutting West Bengal Chief Minister Mamata Banerjee’s criticism of the Income Tax raids on Tamil Nadu Chief Secretary P Ramamamohana Rao, BJP said Wednesday’s raids prove the agency was working without any discrimination and had carried out a “usual procedure.” Read more here After backlash, RBI amends Rs 5000 deposit order, says KYC account holders won’t be asked questionsAfter facing huge backlash, the Reserve Bank of India (RBI) on Wednesday amended its order on deposit limit of Rs 5,000 and said that KYC account holders will not be asked questioned. Read more hereWatch: Dramatic video footage of Mexico fireworks market fire that left 31 dead, several injuredA series of massive explosions destroyed a fireworks market outside the Mexican capital on Tuesday, killing at least 31 people, injuring dozens and leaving the market a charred wasteland. Read more hereWatch: Sunny Leone sizzles in ‘Laila Main Laila’ song from Shah Rukh Khan’s ‘Raees’The much awaited dance number from ‘Raees’ is finally out and we’re completely digging it. Read more here

Demonetisation effect: Railway station cashier in Mumbai forced into money scam by senior

Prime Minister Narendra Modi‘s 50-day deadline is fast approaching. Despite Finance Ministry and the Reserve Bank of India’s (RBI) repeated assurances that there is enough currency stock to last beyond 30 December, the queues outside ATMs and banks are not going away. With the government flip-flopping on demonetisation rules, whether the cash crunch will stabilise after the 50-day period is a matter of conjecture.

The Income Tax department stepped up its crackdown on black money but reports of seizures of new currency notes have also emerged. In a letter to the vigilance department, a senior cashier at CST station, Mumbai revealed that she was forced by a senior to give Rs 50, Rs 100 notes in exchange of Rs 500 and Rs 1,000, reported Mumbai Mirror.

The report added that the CBI has booked assistant commercial manager KL Bhoyar based on the cashier’s letter. She alleged in the letter that between 13 and 17 November Rs 7.3 lakh was exchanged from her counter.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

Mumbai Mirror reported that the CBI suspects that Bhoyar has used the same modus operandi and have exchange amount that could amount to ” a few crores of rupees”.

Meanwhile, the RBI did a U-turn on customers depositing demonetised notes over Rs 5,000 till 30 December by making it clear that there will be no questions asked either in case of one-time or repeat deposits if the accounts are KYC-compliant.

Such customers will also not be questioned by bank officials on why they had failed to deposit the old notes earlier.

The RBI turnaround came as Finance Minister Arun Jaitley’s assurance on Monday night and on Tuesday that there will be no questions asked to customers who would make one-time deposit above Rs 5,000 failed to persuade bank officials who insisted that there should be fresh circular from RBI so that customers will not be harassed. However, customers with non-KYC accounts will be subject to stiff conditions imposed by RBI on 19 December for deposit of junked notes.

The decision follows widespread criticism of the guidelines, with people saying the Prime Minister as well as
the finance minister have asked people not to throng the banks as they have time till 30 December to deposit invalid notes in their accounts.

With inputs from PTI

First Published On : Dec 21, 2016 17:07 IST

RBI U-turn on Rs 5,000 deposit rule: It’s time for Central bank to come out of its trance

The Reserve Bank of India (RBI) has done well by removing restrictions on deposits above Rs 5,000 for the remaining days of this month when the deadline to surrender old, invalidated currency expires.

Though Wednesday’s RBI notification is silent on the reasons for reversing the move, it is obvious that the decision is triggered by widespread criticism against its earlier directive that required anyone who wanted to deposit over Rs 5,000 in old currency to face questions by two bank officials on why he/she didn’t do it earlier.

Even if one makes multiple deposits that add up to more than Rs 5,000, the restrictions would have kicked in.

This was a breach of promise and lacked logic as this writer said in an earlier Firstpost column.

Reserve Bank of India (RBI). ReutersReserve Bank of India (RBI). Reuters

Reserve Bank of India (RBI). Reuters

The new RBI notification, which says the old directive will not apply for KYC compliant accounts, would mean that almost all genuine customers will escape the unnecessary scrutiny, since majority of bank accounts are now KYC compliant. The only exceptions, perhaps, are Jan Dhan accounts which were opened with loose KYC norms and fraudsters.

The Rs 5,000 limit was absurd looking at the purpose (tackling tax cheats) from any angle. Any large deposit in any kind of account should naturally trigger scrutiny by bankers and taxmen to check likely money laundering. For this the government and the RBI didn’t need to trouble all customers and bank officials at a time when the common man is already feeling the pain of an artificial cash crunch.

Besides, such a restriction contradicted the repeated promises of Prime Minister Narendra Modi and Finance Minister Arun Jaitley that people do not need to rush to bank branches to deposit their old currency since there is time till 30 December.

In hindsight, the many flip-flops by the RBI and the government show the lack of planning and coordination among the top authorities who handle the demonetisation implementation. There are reasons to believe that the central bank isn’t in control of the situation and experts have pointed fingers at the erosion in the credibility of the central bank, an institution that is known for its ability to drive the economy through even worse phases with skill and conviction.

It was clear the Rs 5,000 deposit rules will hit the common man hard. Those who would have waited for the queues at the banks to get shorten to deposit their old currency savings, were taken by surprise with this rule. Remember, a number of time rules have changed for the common citizens on cash withdrawals and deposits. Last month, the government had abruptly stopped the currency exchange facility at bank counters after initially promising until 30 December. Bankers, at one point, even inked customers to ensure people don’t withdraw cash beyond certain specific limits, reminding one of war-time rationing. All this created more panic and confusion among the public.

Demonetisation, in the scale the Narendra Modi government has undertaken (pulling out 86 percent of the currency in circulation), has no parallel among major economies.

The entire world is watching this episode in India as a rare case study of a botched up economic reform plan. No one has a clue on where this is taking the Indian economy – the fastest growing major economy in the world – in the days ahead. In this backdrop, there is a closer scrutiny on the Indian central bank and government by global economy watchers and investors on each and every stage of demonetisation.

Here frequent flip-flops in rules only does damage to the credibility of the economy and its political and economic institutions.

As of now, there are a few missing links in the demonetisation plan that the central bank needs to clarify, including the number of new Rs 500 and Rs 2,000 notes printed, giving guidance to the public on until when the cash crunch will last and what is the cost of the exercise to the economy.

Except for assurances there is enough cash in the system, the RBI hasn’t offered specific details of the currency operation that is underway to ease panic. The RBI assurances do not reflect on the ground as still ATMs run dry and bank branches ration money. So far, since the 8 November demonetisation announcement, there have been 60 circulars issued by the finance ministry and the RBI. This points to a lack of planning and hold of the situation.

The RBI should make up its mind and guide the economy and the general public through this uncertain phase. Though demonetisation began as a political decision, the responsibility to ensure that this does not harm multiple spheres of the economy equally lies with the central bank which is the authority of monetary policy and currency in circulation. It’s high time the RBI came out of the trance and took control of the situation.

First Published On : Dec 21, 2016 15:24 IST

Demonetisation: Bank officer’s union to protest investigative role being thrusted on banks

New Delhi: All India Bank Officers’ Confederation (AIBOC) has registered a protest to RBI on bank officers being assigned investigative role for customers depositing in excess of Rs 5,000, and demanded complete withdrawal of the order as the staff are facing public wrath.

Even as RBI partially modified its deposit guidelines, the union will be holding demonstrations all over the country in front of Reserve Bank of India offices later on Wednesday to press for withdrawal of the notification.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

The RBI on Wednesday modified guidelines saying KYC compliant account holders can deposits more than Rs 5,000 in old currency notes without being questioned by bank officials.

Earlier this week, the RBI issued a notification directing banks to conduct due diligence of customers who wish to deposit more than Rs 5,000 in old currency till 30 December.

“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,” RBI had said.

“The instructions issued vide the RBI communication dated 19 December must be withdrawn forthwith as the banker shall not carry out the duties of CBI/ED/IB at the busy counters,” AIBOC General Secretary Harvinder Singh said in a representation to RBI Governor.

No accountability should be fixed on the bank officers in this respect as they are thrust with a role not expected of them, it added.

“Having demanded this, we strongly feel that withdrawal of the instruction itself will only confirm the Prime Minister’s statement to the public on November 8 and improve public confidence in the banking system and reduce the hardships faced by the officers at counters,” it said.

Pointing out that the banking system itself is losing credibility because of frequent changes in RBI/Government policies, Singh said customer dissatisfaction is increasing because of chaos and confusion created in implementation of the scheme.

“Bank Officers are being subjected to the anger, anguish and wrath of customers or general public due to short supply of currency notes to the banks, particularly to Public Sector banks,” it said.

First Published On : Dec 21, 2016 14:53 IST

Personal attack by Rahul Gandhi on PM Modi will open pandora’s box: BJP

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Hitting out at the Prime Minister once again, Congress Vice President Rahul Gandhi on Tuesday likened the repeated changes in the rules regarding deposit of old currency notes in banks to his changing of “clothes” and said the message going out was that the Prime Minister’s words are “hollow”.BJP responded by warning that such “personal attacks” by Gandhi on Modi will open a pandora’s box.”RBI is changing rules like the PM changes his clothes,” Gandhi tweeted, while posting an article on the RBI rules announced post demonetization. He was commenting on the new decision of the government under which an amount more than Rs 50,00 in scrapped currency can be deposited only once per account till December 30. Earlier, the Prime Minister, while announcing the demonetization decision on November 8, had said old Rs 500 and Rs 1000 notes could be deposited in banks till December 30 without any questions asked. “Prime Minister’s words should have weight. Prime Minister had promised the country that people can deposit their money in banks till December 30. Yesterday, Government had again changed the rules. This is 125th time rules were changed. Yesterday, the Government gave a message that words of Prime Minister are hollow,” Gandhi said.Noting that the Prime Minister had said money can be deposited in banks till December 30, the Congress leader said yesterday, however, the government said “no you cannot”. “The words of Narendra Modi are without any weight and are hollow. We will show how hollow they are,” he told ANI later. Reacting to the attack, BJP’s National Secretary Sidharth Nath Singh said it reflected the “DNA of Congress and Gandhi family” and he should desist from it. Singh warned that such personal attacks on Modi by Gandhi will open a pandora’s box.Gandhi’s attack came as the Congress leader is all set to take the battle over the issue of demonetization to the turf of the Prime Minister with a rally at Mehsana in Gujarat tomorrow. After Gujarat, Gandhi will be addressing rally at Bahraich in poll-bound Uttar Pradesh on December 22 and at Almora in Uttarkhand the next day. Assembly polls in Uttarkhand are also scheduled early next year. On December 24, Gandhi will be addressing a rally at Dharamsala in Himachal Pradesh.

I-T raids uncovered Rs 3,185 Crore of undisclosed income since demonetisation

New Delhi: Over Rs 3,185 crore of un-disclosed income has been detected while Rs 86 crore worth new notes have been seized by the Income Tax department as part of its country-wide operations against black money hoarders post the demonetisation of two high value currencies by the government.

Official sources said the taxman carried out a total of 677 search, survey and enquiry operations under the provisions of the Income Tax Act since the note ban was declared on 8 November, even as the department has issued over 3,100 notices to various entities on charges of tax evasion and hawala-like dealings.

Representational image. PTI

Representational image. PTI

The I-T department, they said, has seized cash and jewellery worth over Rs 428 crore during the same period even as the new currency seized (majorly Rs 2000 notes) is valued at about Rs 86 crore.

“The total undisclosed income admitted or detected as part of this action, till 19 December, is more than Rs 3,185 crore,” they said.

The agency has also referred over 220 cases to its sister agencies like the CBI and the Enforcement Directorate (ED) to probe other financial crimes like money laundering, disproportionate assets and corruption as part of their legal mandate.

Officials said various tax offices in the country and it’s policy-making body Central Board of Direct Taxes (CBDT) are also coordinating with banks and their regulator RBI as part of these investigations, being carried out to check tax evasion and illegal profiteering leading to black money.

Meanwhile, the headquarters of these probe agencies have issued orders to all their field formations to deposit the new currency, being seized by their officials in operations, in bank accounts rather than keeping it in strong rooms.

“This way the new currency can come into circulation and help banks dispense it to the public,” they said.

The I-T department has also asked its field formations to coordinate with local police, also making huge cash and jewellery seizures, to understand the complete modus operandi of black money generation post demonetisation.

First Published On : Dec 20, 2016 22:32 IST

RBI changing rules like PM changes his clothes: Rahul Gandhi’s fresh jibe at Modi

<!– /11440465/Dna_Article_Middle_300x250_BTF –>In yet another swipe at Prime Minister over demonetization after RBI announced restrictions on depositing scrapped Rs 500 and Rs 1,000 notes, Rahul Gandhi on Tuesday said the country’s central bank is changing rules “like the PM changes his clothes”.The Congress Vice President took to twitter to lash out at Prime Minister Narendra Modi after the AICC demanded rollback of the restriction under which an amount over Rs 50,00 in scrapped currency can be deposited only once per account till December 30. “RBI is changing rules like the PM changes his clothes,” Gandhi tweeted, while posting an article on the RBI rules announced post demonetization.The attack came as the Congress leader is all set to take the battle over the issue of demonetization to the turf of the Prime Minister with a rally at Mehsana in Gujarat on Wednesday.At a rally in Jaunpur, Rahul had on Monday said that only 1% people have 60% of the country’s wealth and that “Modi has made fun of 99% honest people through demonetization”.After Gujarat, Gandhi will be addressing rally at Bahraich in poll-bound Uttar Pradesh on December 22 and at Almora in Uttarkhand the next day.Assembly polls in Uttarkhand are also scheduled early next year. On December 24, Gandhi will be addressing a rally at Dharamsala in Himachal Pradesh.Former Finance Minister P Chidambaram also slammed the new restrictions, calling them “desperate measures of a desperate government” at a time when hoarders have “laundered their money while the poor and the middle class have been left high and dry”.In a series of tweets, he wondered, “Old notes usable until Dec 15. Why can’t we deposit remaining notes until Dec 30 as notified?” Chidambaram said, “RBI makes new rule on deposit, FM contradicts. Who should citizen believe? Neither has credibility.”

Demonetisation: This explanation by Yogendra Yadav for delayed cash deposit is bang on

Political activist and academic Yogendra Yadav has given an explanation to his bank that many harried customers, now hurrying to the bank, would want to give to their banks for making delayed deposits.

In the hard hitting declaration he submitted while making a “small deposit”, Yadav has said that he was waiting for the queues to end to approach the bank and that he saw no reason to offer any special explanation for his decision.

“I see no reason to offer any special explanation for the same [for making the deposit now]. I normally like and wait for the queues to end. I was assured by the Prime Minister,the Finance Minister and the RBI that there was no need to rush to the banks and that I had till 30 December for making any deposit. I believed them,” Yadav has said in his crisp letter.

Yadav’s explanation comes a day after the finance ministry and RBI brought out a notification saying that the customers can make deposits worth more than Rs 5,000 of old Rs 500 and Rs 1,000 notes only once until 30 December now and that they will also have to explain why they did not do so before hand.

Yogendra Yadav. PTIYogendra Yadav. PTI

Yogendra Yadav. PTI

Later on Monday finance minister Arun Jaitley had clarified that the customers need not give explanations if they are making the deposits in one go. He said bank officials will question only if a customer is making deposits repeatedly.

Explaining the rationale behind the move, the finance ministry had said the decision was taken as “it is expected that, by now, most of the people would have deposited such old notes in their possession”. However, one reason, which was not mentioned in the release but is widely known, is the government’s suspicion that a few tax evaders may be laundering their ill-gotten wealth before the deadline ends by using proxies to make deposits in banks.

There is also assumption that the government may be trying to reduce deposit gathering at banks after the demonetisation, which has already surpassed all estimates. Going by the pace of deposit accrual, there are fears that the final number may prove the entire demonetisation exercise a futile one as a higher-than-expected figure would mean return of the black money into the system.

The latest directive, however, came as a shock to many as it goes against the promise that Prime Minister Narendra Modi gave while making the demonetisation announcement on 8 November. He had then said that nobody needs to panic as there is time until 30 December to make deposits of old Rs 500 and Rs 1,000 notes. This promise was repeated in many government advertisements and also by other ministers to calm down the public.

Those honest customers who waited patiently until the queue shortens at the bank branches are now at the receiving end of the new directive. Read in this context, Yadav’s explanation is bang on.

First Published On : Dec 20, 2016 17:22 IST

Demonetisation: Jaitley claims enough cash in system, but discrepancies emerge in RBI, govt numbers

New Delhi: Several new and large discrepancies have emerged in the stated positions of the Reserve Bank of India (RBI) and the government on the printing and distribution of new currencies following the demonetisation of Rs 1,000 and Rs 500 notes on 8 November.

These discrepancies include a highly unlikely surge in the supply of high-denomination notes in two days. They also show substantial divergence in figures given by the central banker and those given by the government in Parliament. And finally there’s an unexplained hiatus in the supply of notes for 11 days.

Either parliament has been misled, or claims about the supply by the RBI are flawed.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

Let’s look at the figures in chronological order:

On 28 November, the RBI issued a press release saying that the public had withdrawn Rs 2.16 lakh crore in new notes from accounts or ATMs till 27 November. As RBI chose not to give any break-up of this amount, it is fair to assume that some of this was in lower denomination notes of Rs 100 or less.

However, according to a written reply to a question in the Rajya Sabha, the Minister of State for Finance, Arjun Ram Meghwal, categorically stated that, by 29 November, a total of 1,608 million pieces (160.8 crore) of Rs 2,000 denomination and 156 million (15.6 crore) pieces of Rs 500 had been supplied — a total of 1,764 million pieces (or 1.76 billion) amounting to a little over Rs 3.29 lakh crore. The minister’s reply came on 6 December.

There are two significant points to note here:

One, that the government’s number implies that the currency disbursal had shot up by over Rs 1.13 lakh crore in just two days. This, when the RBI had supplied Rs 2.16 lakh crore in 17 days till then — at an average of only Rs 12,700 crore a day.

Moreover, Meghwal’s number pertained only to high denomination notes, whereas the RBI number was a mix of all denominations. In other words, the discrepancy between the two sets of numbers would have been even higher if the minister’s reply in Parliament had included the smaller denomination currency notes disbursed till 29 November.

Now things begin to get even more curiouser.

On the day the monetary policy was announced (7 December), the RBI revealed a new set of disbursal figures. The Deputy Governor of RBI, R Gandhi, said a total of Rs 4 lakh crore had been disbursed as of the previous day.

Of this amount, Rs 1.06 lakh crore was in smaller denomination currency notes, according to Gandhi, while the rest — Rs 2.94 lakh crore — implicitly, was by way of high-denomination notes.

This figure of Rs 2.94 lakh crore, which was announced seven days after the date of disbursal given in Parliament reply, is substantially less than the amount of Rs 3.29 lakh crore mentioned in the minister’s written statement about supply till 29 November.

Yet again, on 12 December, Gandhi, while speaking to reporters, said that a total of 1.7 billion notes of higher denomination of Rs 2,000 and Rs 500 had been issued to the public till 10 December.

That means, a full 11 days after Meghwal’s reply that 1.76 billion high-value notes had been disbursed by 29 November, the RBI was stating that the notes given out had been less or at best the same — if one assumes that he was giving a rounded-off figure of 1.7 billion.

Was the disbursal or printing of new notes stopped from 29 November to 10 December?

How does the RBI square with these discrepancies?

Further, the government has been talking about the printing presses working overtime. Economic Affairs Secretary, Shaktikant Das, told Doordarshan in an interview on 17 December that 80 percent to 90 percent of the currency being printed a few days after the demonetisation date was of Rs 500 notes.

According to Meghwal’s information, the amount of Rs 500 notes supplied till November 29, a full 20 days after demonetisation, was only Rs 7,800 crore (15.6 crore notes).

In comparison to the value of notes that were demonetised — Rs 8.58 lakh crore — the new Rs 500 notes amount to less than one per cent (0.91 per cent).

If we take Gandhi’s words at face value, then, even on November 10 — more than a month after demonetisation came into effect — there was not much change.

Of course, the Rs 2,000 notes, which the Economic Affairs Secretary has said were being printed for “months” are considerably more in circulation.

The value of such notes supplied on 29 November was Rs 3.21 lakh crore (160.8 crore x Rs 2,000) — almost 47 per cent compared to value of Rs 6.86 lakh crore (of Rs 1,000) demonetised. But Rs 2,000 notes are not easy to spend and have created a bottleneck in the cash economy.

Again, according to Gandhi’s information, till December 10, there seems to have been no change even in the Rs 2,000 notes circulated.

The shortage of notes, it seems, would continue much beyond the 50 days that the prime minister has mentioned.

First Published On : Dec 20, 2016 15:38 IST

Robert Vadra mocks Modi govt for turning banks into interrogation offices

<!– /11440465/Dna_Article_Middle_300x250_BTF –>With the Opposition joining hands against the Prime Minister Narendra Modi-led government’s decision to demonetize high-denomination currency notes of Rs. 500 and Rs. 1,000, Congress president Sonia Gandhi’s son-in-law, Robert Vadra on Tuesday joined the onslaught and launched a twin attack over demonetization and the recent Reserve Bank of India (RBI) announcement on deposits.”It is sad to see people suffering due to the whims & fancies of the government. I feel for the people and their difficulties they have and are facing,” Robert Vadra said in a post on his Facebook account.Regarding the recent announcement by the RBI allowing deposits of old notes exceeding Rs. 5000 only once till December 30 after a satisfactory explanation, Vadra mocked the government for turning banks into interrogation offices.”Now, deposits of more than Rs. 5,000 of demonetized currency notes will be allowed only once till December 30 & that too with an explanation. It has turned financial institutes into interrogation offices,” he said.

Thanks to Modi govt one can neither withdraw nor deposit his own money now: Congress

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Coming down heavily on the Centre over the burning issue of demonetization, the Congress on Tuesday said the rules related to the move have changed over a 100 times since the major step was taken and over a 100 people have died, but it seems to have made no difference to the government which continues to remain unashamed of the inconvenience it has caused across the nation.”We want to ask Modiji that he had said on November 8 that people can deposit money in their accounts till December 30 and in the Reserve Bank of India (RBI) till March 21, 2017, so why has he betrayed the people now? Till today, rules related to demonetization have changed 125 times. More than 100 people have died. Still the government is not ashamed of itself,” Congress leader Randeep Surjewala said.Miffed with the fact that a person can neither withdraw his money, nor deposit, Surjewala said only Modi government could lead to such bankruptcy.Commenting on the recent development announced by the Reserve Bank of India stating that deposits exceeding of old Rs 500 and Rs 1000 notes exceeding Rs 5000 shall be made only once per account till December 30 but after a satisfactory explanation, Surjewala said that even the banks are going to look like police stations asking questions to one about his own money.”Modi government has led to twin surgical strike on India’s workers, labourers and the common man. On the one hand, the interest rate of Employees’ Provident Fund (EPF) has been reduced from 8.8% to 8.65% & on the other hand, in a (Tughlaqi farmaan) has now put a cap of Rs. 5000 on one’s own deposits. Even when you will go to make deposit, the bank officer will question you like a police inspector and will ask you the source of the money,” he said.Striking the same chord of objection over Prime Minister Modi’s absence in parliament, Surjewala asked the former to show some courage. “In spite of 300 members of parliament, Modiji is shying away from having a discussion on demonetization scam and its investigation. He has time to attend rock concerts, to put allegations in rallies, but does not have the courage to respond in parliament. Modiji, show some courage and stop insulting democracy,” he said.”The truth of deceit will be revealed only after the investigation of the demonetization scam. Modi ji, the entire nation knows that your intentions are black,” he added.The Reserve Bank of India (RBI) on Monday announced that deposits of old Rs 500 and Rs 1,000 notes exceeding Rs. 5000 shall be made only once per account until December 30 but after a satisfactory explanation.Tenders of Specified Bank Notes (SBNs) in excess of Rs. 5000 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 the 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.

Demonetistion: Sudden spurt in queues at bank branches as new deposit rules kick in

New Delhi – Unnerved by new set of guidelines announced by the RBI, people rushed to bank branches to deposit the now defunct Rs 500/1,000 notes in their accounts.

Many branches witnessed sudden surge of customers for deposits on Monday, a day before the new rules kick in.

The Reserve Bank on Monday imposed stiff restrictions on depositing more than Rs 5,000 in the scrapped Rs 500 and Rs 1,000 notes, mandating that it can be deposited only once per account till December 30, that too after explaining to bank officials the reasons for not having done that so far.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

Stipulating that restrictive conditions will also apply on the cumulative deposit of such notes in a single account when it exceeds Rs 5,000, RBI said that defunct currency up to any amount can be deposited under the new black money amnesty scheme PMGKY.

Under PMGKY, black money holders can deposit unaccounted cash in account which will be subject to 50 per cent tax and 4-year interest free lock-in for the remaining 25 per cent of the amount.

The RBI said old 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.

Even after 39 days after the demonetisation of old Rs 500/1,000 notes, banks are still struggling to manage long queues as cash starved customers throng branches to get valid currency notes.

To meet the demand, branches are resorting to cash rationing as they are getting less than their requirement from currency chests.

However, the situation seems slightly better at many ATMs with increased cash availability.

Finance Minister Arun Jaitley had said everyday RBI is injecting a large amount of currency into the banking system as part of its remonetisation exercise.

“Significant amounts are going to be injected in next three weeks which are gradually bringing the pressure down. As more and more new currency comes into circulation, the recirculation itself in the banking system and ATMs will make more currency available,” Jaitley had said.

First Published On : Dec 20, 2016 08:49 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 rule change: You can make more than Rs 5,000 deposit only once per a/c before 30 Dec

The finance ministry and the Reserve Bank of India have put in place new restriction on deposits of old Rs 500 and Rs 1,000 until 30 December in another effort to curb money laundering.

According to a finance ministry notification (read here), deposits of the demonetised notes above Rs 5,000 can be made only once until 30 December, the last date for banks to take deposits of old notes. However, there is no restrictions on depositing cash under the Pradhan Mantri Garib Kalyan Yojana, a black money declaration scheme under amended taxation laws.



“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 RBI said in a notification to banks posted on its website.

The central bank has also said in such cases the notes will be credited to deposits “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 has said.

However, banks can allow deposits of up to Rs 5,000 in value to be credited to bank accounts in the normal course until 30 December.

Moreover, if you have made deposits smaller that Rs 5,000 your account, and if such deposits taken together on cumulative basis exceed Rs 5,000 then they may still have to face the questions from the banks officials. In such cases, you may not be allowed to make more deposits thereafter until December 30.

Also deposits above Rs 5,000 shall be credited to only KYC compliant accounts and if the accounts are not KYC compliant the limit for deposits stays at RS 50,000.

However, these rules are not applicable to deposits under the Taxation and Investment Regime for the Pradhan Mantri Garib Kalyan Yojana.

First Published On : Dec 19, 2016 13:53 IST

People have lost faith in RBI, banking system post demonetization: Anand Sharma

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Congress on Sunday targeted RBI and banks in the country, saying people have “lost faith” in the “banking system” after Prime Minister Narendra Modi’s “disastrous movement” to demonetize the high-value currency notes.Senior Congress leader and party’s chief spokesperson Anand Sharma alleged that “crores and crores and crores of newly-printed currency (notes) are going out” from the “back doors” of the banks while common people were denied their right to withdraw their hard earned money they have deposited in these banks. “People had faith in Indian banking system. After the financial crisis and after the economic crisis of 2008-09, Indian banks showed their resilience and their trustworthiness. “The Reserve Bank of India had a formidable reputation.Today, people’s trust in the Indian banks is shattered and the reputation of the RBI is dented,” Sharma told reporters here. The ex-Union Minister for Commerce said, “I am telling you why. People who toil hard have small small savings. You put your money in the bank and you have the assurance that the money is safe. When I need it, I can go to the bank and withdraw it.” “But the bank is not giving that money. Because cash is not available and the cash which is available is not coming from board or the counter”, he said. “ATMs are running dry. And from the back doors crores and crores and crores of newly-printed currency is going out.So how can people have trust…” he asked.He said it will take a long time for the Indian banks to rebuild their trust. “What ethics are there and correctness is there when your own money is snatched. You will say that your money is there, don’t worry. It is safe. But it is safe with me as a government. I will use it the way I want and I won’t give it to you. That is where the trust is gone. It will take a longtime to rebuild the trust in the banking system,” he said.Sharma, who is also the Deputy Leader of Opposition in the Rajya Sabha, attacked Prime Minister for the “sufferings” of the people through the “disastrous movement”. “Prime Minister must be held to account and the BJP government for creating the huge upheaval in the lives of the citizens for afflicting the sufferings, for destroying the economy and for over 111 deaths. He has misled the nation and its people,” he said.

DNA Morning Must Reads: New Army, Air Force chief; RBI officials held in currency fraud & more

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Lt Gen Bipin Rawat is next Army chief, Air Marshal Birender Dhanoa to head Air ForceThe Centre on Saturday named Lt Gen Bipin Rawat, Vice-Chief of the Indian Army as the next Army chief, succeeding General Dalbir Singh Suhag. The decision could trigger a controversy as Rawat has superseded Lt Gen Praveen Bakshi, who is heading the Eastern Command, and Lt Gen PM Hariz, heading the Southern Command. Read moreTwo more RBI officials held in currency exchange fraud, arrests a big blow to regulatorTwo more officials of the Reserve Bank of India (RBI) were arrested by the Central Bureau of Investigation (CBI) on Saturday for their alleged role in currency conversion fraud cases. Read moreThree soldiers killed in militant attack on Army convoy in J&KMilitants sent a chilling reminder to the Mehbooba Mufti-led government on Saturday when they attacked an Army convoy on the strategic Srinagar-Jammu National Highway at Kadlabal, Pampore, in south Kashmir, leaving at least three army men dead. Read moreCricket prodigy Pranav Dhanawade’s brush with lawFifteen-year-old Pranav Dhanawade from Kalyan, who took the cricket world by storm with his 1,000-run world record knock in a local game in Mumbai in January 2016, was on Saturday detained by the police after he allegedly got into a spat with them on being prevented from practising on a ground being used as a makeshift helipad for a Union minister’s visit to the city. Read moreNo New Year cheer for gay couples as restaurants, bars shut their doorsSame sex couples wanting to ring in the New Year with a bang are in for a rude shock. Not only are high-end bars and nightclubs turning them away, they are actively stating that they will only accept heterosexual couples. Read more

Two more RBI officials held in currency exchange fraud, arrests a big blow to regulator

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Two more officials of the Reserve Bank of India (RBI) were arrested by the Central Bureau of Investigation (CBI) on Saturday for their alleged role in currency conversion fraud cases.The arrests, coming in less than a week’s time, have caused much discomfort for the central bank, which had maintained that the one arrested earlier was a junior-level functionary. The fresh arrests put into question the role of its officials involved in currency exchange process, initiated following Prime Minister Narendra Modi’s note ban announcement on November 8.The two accused—identified as Sadananda Naika and AK Kavin—are posted as Senior Special Assistant and Special Assistant RBI’s cash department in Bengaluru. The first to be arrested, K Michael, was a Senior Special Assistant in the Issue Department of RBI’s regional office.Elaborating on the arrests, a CBI official said the accused fraudulently gave away new currency notes to unknown RBI officials and others in replacement of demonetized notes to the tune of Rs 1.99 crore, in violation of the currency exchange limits imposed by the RBI.”It is alleged that both the accused and other unknown officials of RBI, Bengaluru entered in criminal conspiracy with unknown others,” said the official. Among several sections of the Prevention of Corruption Act and the Indian Penal Code, the duo was slapped with charges of criminal conspiracy, fraud, criminal breach of trust and so on.The arrests come after the RBI, earlier this week, claimed that “elaborate instructions” had been given to bank managements to keep in check untoward transactions.It was the arrest of Parashivamurthy—a cashier of the State Bank of Mysore in a branch in Chamarajnagar district for allegedly exchanging demonetized notes to the tune of Rs 1.51 crore with Rs 100 notes—that led the agency to Michael. Further probe revealed the role of more officials.In another incident, CBI registered case against KL Bhoyar, Assistant Commercial Manager, Central Railway, CST Mumbai. The agency said Bhoyar allegedly exchanged demonetized currency worth Rs 8.22 lakh (approx) with new Rs 2,000 notes and legal tender of Rs 100 notes at booking counters at CST, Mumbai and Kalyan in Thane district. The agency also recovered Rs 2.2 lakh cash—in denomination of Rs 100—in subsequent raids.

Demonetisation: CBI arrests two RBI officials in currency conversion case

New Delhi: CBI has arrested two employees of cash department of Reserve Bank of India in Bengaluru in connection with alleged conversion of Rs 1.99 crore of demonetised currency with specified bank notes of Rs 2,000 and Rs 100.

CBI sources said Senior Special Assistant Sadananda Naika and Special Assistant A K Kavin were arrested for unauthorised exchange of the currency and have been booked under charges of criminal conspiracy and cheating besides provisions of Prevention of Corruption Act.

Both the accused have been sent to four days of CBI custody by a special court in Bengaluru, they said.

Representational image. AFPRepresentational image. AFP

Representational image. AFP

“It is alleged that both the accused and other unknown officials of RBI, Bengaluru entered in criminal conspiracy with unknown others,” CBI spokesperson Devpreet Singh said.

She said in furtherance with the criminal conspiracy, the accused, along with other unknown officials, who were entrusted with the responsibility of new currency notes, “fraudulently” gave away new notes to the tune of Rs 1.99 crore to RBI officials and others.

It is alleged that the exchange was done in violation of exchange limits imposed by the Bankers’ Bank.

CBI had earlier arrested another employee of RBI in a separate case in which currency worth over Rs six lakh was converted by him using his influence over officials of State Bank of Mysore.

First Published On : Dec 17, 2016 18:39 IST

Demonetisation impact: Onion rates halve, farmers have no cash, but can’t go cashless

By Swagata Yadavar

Pimpalgaon/Lasalgaon, Nashik (Maharashtra): Prime Minister Narendra Modi will be happy with 26-year-old Deepak Patil, an onion farmer from the village of Valwadi in Malegaon Taluka, about 300 kilometres north of Mumbai, India’s commercial capital. Patil, dressed in a grey jacket, over his white shirt and jeans, said he has a bank account, a cell phone, and receives payment for his onion produce in cheque.

But Patil, who sells his produce in Pimpalgaon, a market in India’s onion heartland, Maharashtra–producing a third of all onions in the country–is not happy with demonetisation, or notebandi as it is colloquially called, and does not believe he can go cashless.

Onion farmer Deepak Patil. Image courtesy: IndiaSpend

An onion farmer. Image courtesy: IndiaSpend

After 9 November, when Rs 500 and Rs 1,000 notes — 86 percent by value of Indian currency in circulation — were declared invalid, the government pushed for cashless transactions and digital payments. Patil — with access to banking and a cell phone — could, in theory, move to cashless transactions, but in reality there is no Internet access where he lives, the closest ATM is at least 25 kilometres away, the closest nationalised bank 15 kilometres away, and the government has currently placed restrictions on the district cooperative bank that hosts his account.

Nashik district, which contains Lasalgaon and Pimpalgaon, two of India’s busiest onion markets, contributes 10.4 percent of Maharashtra’s gross state domestic product, the highest of any agricultural district in the state, according to this 2014 Economic Survey 



Patil’s trials with the banking system, and the effect of demonetisation on the rural economy of Nashik, show how 800 million Indians, who depend on the rural economy, have been affected by the ban on notes over the last 35 days.

Hours in queues at a bank, only Rs 2,000 in hand

The Reserve Bank of India (RBI) barred the bank where Patil’s account is–Nashik District Central Cooperative Bank (NDCC), and all other district central cooperative banks (DCCBs)–from exchanging defunct notes for Rs 100 notes or for new notes of Rs 500 and Rs 2,000.

Patil deposited Rs 21,000 by cheque in his NDCC account, hoping he could withdraw some money to pay labourers who work on his farm, repay lenders and buy groceries–transactions that still take place in cash.

“It takes more than two weeks for the cheque to be deposited,” said Patil. “All we can do till then is wait.” Even when the money was deposited in his account, it was no easy feat to withdraw it.

“I have to stand in line at the bank from 10 am to 6 pm, and all I get is one Rs 2,000 note,” said Patil, who doesn’t have any other bank account. He needed Rs 4,500 to pay labourers and Rs 4,000 for the mini truck that carries his produce to the market in Pimpalgaon, 100 kilometres from his village. These days, he buys food on credit from the local grocer.

Onion farmer Deepak Patil (centre) has a bank account, a cell phone, and accepts payments in cheque. Patil could, in theory, move to cashless transactions, but in reality there is no Internet access where he lives. Image courtesy: IndiaSpend

Onion farmer Deepak Patil (centre) has a bank account, a cell phone, and accepts payments in cheque. Patil could, in theory, move to cashless transactions, but in reality there is no Internet access where he lives. Image courtesy: IndiaSpend

Patil is one of many farmers who bank with district cooperative banks. As many as 371 such banks with over 140,000 branches across the country provide banking access to 2.5 million account holders, according to the 2015 annual report of the National Federation of State Cooperative Banks.

“Seventy percent of farmers in Nashik district have their accounts with NDCC, and many have no other account,” said Shirish Kotwal, director and former chairman of NDCC.

The RBI feared that district banks, which are not under the RBI’s purview, could be used to route black money back into the system, the Indian Express reported in December 2016. Seventy two hours after the announcement to demonetise Rs 500 and Rs 1,000 notes, DCCBs reported deposits of old currency eight times that of nationalised banks.

Patil, the only earning member in a family of six, does not own a vehicle, and chose the closest bank for an account. The closest nationalised bank is 15 kilometres from his village, the district cooperative bank 10 kilometres.

Low rural Internet connectivity

Like 83 percent of Indians who do not own a smartphone, Patil too does not have an Internet connection on his cell phone. So, even though he has a bank account, he cannot access Internet-based banking services.

When asked if he has an ATM card, he laughed and said: “The nearest ATM is 40 kilometres away (IndiaSpend found the closest was 25 kilometres away, but it is unclear if that worked).”

Onion prices halve, stressing rural economy

Mini truck after truck of red onions entered Lasalgaon onion market, the largest in Asia, as a sense of gloom pervaded the air. Farmers huddled in corners as traders decided the price of onions at auctions.

“Ever since notebandi, the rates have decreased by half,” Patil said.

Onions, which were sold for Rs 1,000-1,200 per quintal (100 kg) in the weeks before notebandi, are now sold for Rs 600-700 per quintal.

There were no auctions for ten days after demonetisation because of a lack of valid notes in the market. Onions stored in the market stayed unsold and when markets reopened, new produce flooded the market reducing onion prices.

Farmers have no choice but to sell the red onion at whatever price it sells, as it does not last beyond 10 days, unlike the lighter coloured ‘unhal’ onion that can be stored for three months.

Madhavrao Thorat, another marginal farmer, has no time to spare to stand in the lines outside banks as he is sowing onions in his field, in the village of Devgaon, more than 200 km north of Mumbai. The nearest nationalised bank is eight kilometres away, and the nearest ATM 15 km away. He has not been able to pay his labourers because of a lack of cash.

Madhavrao Thorat, a marginal farmer, has no time to spare to stand in the lines outside banks as he is sowing onions in his field, in the village of Devgaon, more than 200 km north of Mumbai. Image courtesy: IndiaSpend

Madhavrao Thorat, a marginal farmer, has no time to spare to stand in the lines outside banks as he is sowing onions in his field, in the village of Devgaon, more than 200 km north of Mumbai. Image courtesy: IndiaSpend

Excess produce due to good monsoon further reduces prices

Prices have further fallen because of excessive onion production, a consequence of the good monsoon this year.

A drop in prices particularly hits marginal and small farmers, who, like Patil, own less than two hectares, or 4.94 acres of land. These farmers own 78.6 percent of all land holdings in Maharashtra.

Patil, who owns four acres of land which he farms with his brothers, has made a loss of Rs 30,000 because of low onion prices. “Farming for small farmers like us has become unaffordable,” he said.

In 2015, onion farmers from districts around Nashik brought 0.4 million metric tonne of onions to the agricultural market in Lasalgoan–called an Agricultural Produce Market Committee (APMC)–between April and August. Onions brought rose 150 percent to 1 million metric tonne, over the same period in 2016, according to the Lasalgaon APMC.

Lasalgaon Agricultural Produce Market Committee is Asia’s biggest onion market, and most Indian onion is exported from this market. Onions brought rose 150 percent to 1 million metric tonne, between April and August, 2016, compared to the same period last year–further reducing onion prices.

“There has also been enough production of onions in Haryana and Karnataka which has led to a further drop in demand and prices,” said N S Vadhavne, an accountant at Lasalgaon APMC.

“I want to quit farming”

Profits from agriculture have been declining as costs have tripled over the last few years, IndiaSpend reported in March 2016. Coupled with a crash crunch due to demonetisation, and falling prices, Patil is ready to quit.

“Given a choice, I would like to find a job and migrate. Farming is a loss-making business,” said Patil, who enrolled in college, but never completed his bachelor in arts degree.  His wife has a diploma in education, but no job.

“Right now, I don’t have a choice as I am supporting my younger brother,” he said. “But very soon, I will quit farming and look for another job.”


Yadavar is a principal correspondent with IndiaSpend

Indiaspend.org is a data-driven, public-interest journalism non-profit

First Published On : Dec 16, 2016 08:35 IST

Focus is now on Rs 500 notes, assures finance secretary

<!– /11440465/Dna_Article_Middle_300x250_BTF –>The government seems to be firing on all cylinders to deal with the demonetization crisis. On Thursday, right after Amitabh Kant, CEO of Niti Aayog, announced lucky draws to promote digital transactions ranging from Rs 50 to Rs 3,000, Economic Affairs Secretary Shaktikanta Das said that the government had stepped on the gas to supply around 50 per cent of the Rs 15.44 lakh crore of demonetized high-value currency notes in “another week or 10 days”.According to him, in the absence of adequate small-denomination change, there was a “tendency” to hold on to Rs 2,000 notes. “So, with Rs 500 notes being supplied in a big way, Rs 2,000 notes will come back into circulation. The focus now is on printing Rs 500 notes,” he said. He said the infusion of the new Rs 500 notes, whose printing has been increased lately, will swell the cash in circulation.Close to Rs 5 lakh crore or 33 per cent of additional notes had already been brought back into the system. “Roughly, of the Rs 500 and Rs 1,000 notes that had gone out of circulation, about 50 per cent would be supplied in a week or 10 days,” he said.“More production lines have now been diverted to print Rs 500 notes because we now have enough Rs 2,000 notes,” he said. Das said that the supply of lower denomination currency notes – Rs 100, Rs 50, Rs 20 and Rs 10 – by the Reserve Bank of India (RBI) had shot up three times since November 8, the day when demonetization was announced.

Mamata Banerjee, black flags and Congress hecklers: Urjit Patel gets fiery reception in Kolkata

<!– /11440465/Dna_Article_Middle_300x250_BTF –>RBI Governor Urjit Patel met West Bengal Chief Minister Mamata Banerjee under the shadow of continuing protest by her ruling Trinamool Congress against demonetization.Patel told reporters after the hour-long meeting in the chief minister’s chamber in the state secretariat that the “meeting was good”.State Finance Minister Amit Mitra, finance secretary and home secretary were also present during the talks.Banerjee, who is at the forefront of the anti-demonetization protest, said that in the meeting she had expressed concern over people’s hardship and “political discrimination amongst states”.Earlier, Patel attended a meeting of the RBI central board at the bank’s regional office here where the TMC and CPI-M activists staged demonstration.Asked about the meeting, Banerjee told reporters, “I am satisfied with the meeting as I availed the opportunity to express views of the common people who are facing immense hardships”.”The Prime Minister, Parliament, nothing is available. No one is responding. He (Patel) is a direct man who is directly involved in all these… This is my satisfaction that at least I could express the views and explain the situation,” she said.”The RBI is a big institution. We respect it. It should not be politically misused,” Banerjee said adding that though the governor did not answer anything, he had heard her.”There is nothing that could be answered. He was here for an hour and listened to me. And whatever I have said was the problem of the common people. I spoke on the basis of documentation,” she added.Banerjee also asked Patel to give information on the distribution of currencies to different states on RBI’s website “to maintain transparency”.On being asked if during the meeting Patel agreed that the implementation was wrong, the TMC chief said, “look, I don’t think that as a government officer he (Patel) can say that but I think silence is sometimes golden”.Banerjee also said that the meeting with Patel was a “routine one” and that the appointment for it had been sought “before demonetization was announced” by the Centre. The chief minister also handed over a letter to Patel in which she said, “as the Governor of RBI, an autonomous institution with a great history, which issues currencies to the nation, we expect you to stand up against the demonetization onslaught against the common people of the nation at this moment of crisis, rather than falling silent and remaining opaque”.”We would also like to know from you the nature of allocation of new currency to each of the states in a spirit of transparency and accountability, since there are serious concerns of political discrimination amongst states,” the letter said. She said the whole country is going through “unprecedented misery and suffering” due to the “cruel misadventure” of demonetization which has not been seen in any modern democracy.”You are perhaps aware that already five crore workers across the country and across the sectors are facing unemployment and hunger. Unorganised sector of the country which provides 2/3rd jobs in the country has literally collapsed,” the letter read.”The small and medium enterprises are shutting down shops in lakhs. The massive trading sector of the economy has been brought down to its knees due to cash crunch, unable to conduct its business,” it added.”The farmers of our nation are going through a trauma never seen before and that too not due to natural calamity but due to a man-made disaster of massive demonetization. Even the middle and large industries have dropped their production by at least 50 per cent.”Agriculture, food sector, vegetable sector, small traders to shopkeepers, small vendors to 100 day MNREGA workers, small scale to big industry, unorganised to I-T sector, it is everywhere, the common people across the board are deeply suffering. All development work has come to a standstill due to cash crunch. You also know that plastic card is not fool-proof and 92 per cent of the villages in the country have no banks,” she said.Banerjee said that every major economist including Nobel laureates have come out strongly against demonetization, cutting across theoretical leanings.”You are aware that the economy is getting derailed and growth rates of GDP are being revised downwards every other day,” she wrote in the letter. Congress protesters heckles Patel: Chanting slogans like “Urjit Patel go back” and “Urjit Patel hai, hai”, over a dozen protesters tried to block his way when he stepped out of a car at the airport on his way back to Mumbai.The protesters came too close for Patel’s comfort as he started walking towards the entrance of the airport terminal.Policemen accompanying him were seen pushing away the agitators and securing the way for the RBI governor, who earlier in the day attended a meeting of RBI board at the central bank’s office here where TMC and CPI-M staged demonstrations. Even after he had entered the terminal building, the protesters were seen raising slogans.Police said he was also shown black flags by the protesters.He also met Chief Minister Mamata Banerjee, one of the harshest critics of the demonetisation exercise, who voiced concern over the hardship faced by people and “political discrimination amongst states”.

DNA Evening Must Reads: SC on Anurag Thakur; Mamata’s meeting with Urjit Patel; and more

<!– /11440465/Dna_Article_Middle_300x250_BTF –>1. Local Arunachal Congress leaders ‘astonished’ by corruption charges against Kiren RijijuUnion Minister of State for Home Kiren Rijiju, who is at the centre of a controversy for having sought release of payments for contractors named in a vigilance probe, said on Thursday that the Congress Party has made a grave mistake by raising their finger against him, and therefore, they will have to pay the price for their lifetime. Read more here.2. Demonetization: Mamata meets RBI governor Urjit Patel, complains about ‘political discrimination amongst states’Amidst protests by Trinamool Congress against demonetization, RBI Governor Urjit Patel met Chief Minister Mamata Banerjee during which she expressed concern over hardship faced by people and “political discrimination amongst states”. Read more here.3. Aleppo: Rebel evacuation under way after ceasefire dealAn operation to evacuate thousands of civilians and fighters from the last rebel bastion in Aleppo was under way on Thursday, part of a ceasefire deal that would end years of fighting for the city and mark a major victory for Syrian President Bashar al-Assad. Read more here.4. Demonetization | 90% ATMs recaliberated, focus on printing Rs 500 notes: Shaktikanta DasEconomic Affairs secretary Shaktikanta Das stated that the total number of notes in lower denominations of Rs 100 and below supplied in the last five weeks is three times of what the Reserve Bank of India supplies in a year. Read more here.5. SC threatens perjury, contempt proceedings against BCCI President Anurag ThakurThe court reminded the BCCI top brass that Thakur as President of the board had asked for a letter from ICC CEO Dave Richardson that the appointment of a CAG nominee in the cricket body would compromise with autonomy and amount to government interference. Read more here.

Demonetisation impact: RBI Governor Urjit Patel shown black flags outside Kolkata airport

Governor of the Reserve Bank of India, Urjit Patel was on Thursday shown black flags outside Kolkata airport during a protest staged by Congress workers against demonetisation. They also raised slogans “Urjit Patel go back” and “Urjit Patel hai hai“, however,  the security personnel managed to escort the RBI Governor inside the airport.

Earlier in the day, West Bengal Chief  Minister Mamata Banerjee met Patel to express her concerns over demonetisation.  “The meeting was good,” Patel told reporters at the state secretariat.

Earlier, Patel attended a meeting of the RBI central board at the apex bank’s office where Trinamool Congress and CPM workers had staged demonstrations.

When asked about the meeting, Banerjee told reporters, “I am satisfied with the meeting (with Patel)”. “I availed the opportunity to express views of the common man are facing immense hardships due to demonetisation… The prime minister, Parliament, nothing is available. No one is responding. Patel is a direct man,” she said. “RBI is a big institution. We respect it. It should not be politically misused,” she said.

RBI Governor Urjit Patel. PTI

RBI Governor Urjit Patel. PTI

The TMC chief also handed over a letter to Patel in which she said, “as the Governor of RBI, an autonomous institution with a great history, which issues currencies to the nation, we expect you to stand up against this demonetisation onslaught against the common people of the nation at this moment of crisis, rather than falling silent and remaining opaque”. “We would also like to know from you the nature of allocation of new currency to each of the states in a spirit of transparency and accountability, since there are serious concerns of political discrimination amongst States,” the letter said.

The whole country, she said, is going through “unprecedented misery and suffering” due to the “cruel misadventure” of demonetisation which has not been seen in any modern democracy. “You are perhaps aware that already five crore workers across the country and across the sectors are facing unemployment and hunger. Unorganised sector of the country which provides two-third jobs in the country has literally collapsed,” Banerjee said in the letter.

“The small and medium enterprises are shutting down shops in lakhs. The massive trading sector of the economy has been brought down to its knees due to cash crunch, unable to conduct its business.” The farmers of our nation are going through a trauma never seen before and that too not due to natural calamity but due to a man-made disaster of massive demonetisation. Even the middle and large industries have dropped their production by at least 50 percent,” she added.

First Published On : Dec 15, 2016 19:34 IST

Jammu and Kashmir: Congress demands JPC probe into demonetisation

Srinagar: Jammu and Kashmir Congress demanded a probe by Joint Parliamentary Committee (JPC) into demonetisation, charging that it had benefited only some rich people on Thursday. “We demand that there should be a JPC probe into the demonetisation scheme announced by the Prime Minister,” senior Congress leader and Rajya Sabha member K Rehman Khan said.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

“There are apprehensions of selective leaks ahead of the announcement for benefitting some rich (people),” he said. Khan said the BJP had demanded an investigation by JPC into the 2G scam when UPA was in power and they should agree a similar probe now for demonetisation.

“The former Union Minister said the Prime Minister’s announcement had put common masses in trouble. “Why are they troubling the common masses? Is the black money with poor people?” he asked. Khan said Modi, while announcing the demonetisation move, had sought 50 days time for setting things right and so far “36 days have passed but nothing has changed.” “What miracle can he do in the remaining 14 days?” the Congress leader asked. He said a “dictatorial system” was being established in the country as the demonetisation announcement by the Prime Minister had undermined the independence of the Reserve Bank of India. “RBI act says demonetisation is carried out by the RBI.

It is the RBI Governor who signs the pledge on currency notes and not the Prime Minister. Where is the RBI Governor?” Khan asked. He said, initially the government claimed that demonetisation will save Rs 4,00,000 crore which will be used for welfare of the people but “now even that dream is crashing.”

Criticising Prime Minister Narendra Modi for not taking part in the discussion on demonetisation in Parliament, he said, “Why is the PM hesitating in coming to the Parliament? We want to debate, discuss and express our opposition to the move through a vote.” “We know that we do not have the numbers in Lok Sabha but we want to show that the Opposition is united on the issue,” he said.

Speaking on the Kashmir issue, Khan said that the situation is grim in the region and the Prime Minister’s police has “failed” to bring the situation under control.

First Published On : Dec 15, 2016 14:41 IST

Post demonetization crackdown by CBI: 10 cases, 16 arrests and Rs 19 crore in questionable currency

<!– /11440465/Dna_Article_Middle_300x250_BTF –> As part of its ongoing countrywide operation, CBI lodged a case against a Bank of Baroda official in Kolkata for converting old currency in violation of rules, taking the number of such cases to 10 with 16 arrests and Rs 19 crore as currency in question. Cashier of Bank of Baroda, Behala branch, Ranjit Kumar Bhattacharya has been booked by CBI for allegedly converting currency worth Rs 50 lakh using fraudulent means in violation of laid down rules post demonetizationof Rs 1,000 and Rs 500 notes on November 8.Under its countrywide operation continuing for a few weeks, the agency has so far registered four such cases in Karnataka, four in Hyderabad, one in Rajasthan and one in Kolkata.CBI sources said so far it was probing currency conversion of Rs 19 crore, which might increase as the probe progresses and more FIRs are registered by it.The agency sources said it has made 16 arrests across the country which include public servants, middlemen and private persons.In Karnataka, CBI has arrested a JDS leader who is also a casino operator and an RBI official in separate cases of alleged illegal conversion of old currency.Reserve Bank official K Michael, posted in Bengaluru, was arrested by CBI while he was allegedly trying to convert Rs 1.51 crore of old currency notes.CBI sources said Michael, a senior special assistant at RBI, was arrested last week.The agency has also arrested Veerendra in a separate case relating to seizure of Rs 5.70 crore of new currency from the bathroom of the casino owner by the Income Tax department.”We have arrested K C Veerendra. He was arrested in Hubballi on December 10 and brought to Bengaluru the following day and produced before the CBI court. He is in our custody for six days,” a top CBI official told PTI today.Besides Veerendra, middlemen Thipeswamy and Venkatesh, residents of Chitradurga districts of Karnataka, and unknown officials of four banks — State Bank of India, State Bank of Mysore, ICICI Bank and Kotak Mahindra — have also been named in the FIR in this case.A case has been registered against an ATM servicing company and officials of Karnakata Bank and Dhanluxmi Bank. Another case has been registered against Central Bank of India officials and private persons for allegedly facilitating exchange of demonetised notes by issuing 149 Demand Drafts of Rs 70 lakh in the name of a private loan company.In Hyderabad, CBI had registered four cases related to conversion of currency by postal department officials with prime suspect named in the FIR being K Sudheer Reddy, an Indian Postal Service Officer.The agency has also registered an FIR against officials of State Bank of Bikaner and Jaipur, Dausa branch on similar charges.

Banks take back $184 billion of old notes, RBI says | Reuters

By Suvashree Choudhury

MUMBAI Indian banks have taken back 12.44 trillion rupees ($184.24 billion) of high-value currency that the government abruptly abolished last month, Reserve Bank of India Deputy Governor R Gandhi said on Tuesday.That represents about 80 percent of the 15.44 trillion rupees in 500- and 1,000-rupee notes that were circulating before Prime Minister Narendra Modi abolished them on Nov. 8, in a surprise move targeting counterfeiters and people holding undeclared wealth. Analysts had estimated that only about 13 trillion of those abolished notes would be deposited at banks, because people with undeclared cash would be wary of attracting the scrutiny of tax authorities.Indians have until Dec. 31 to turn in their old notes.Economists said total deposits were likely to reach about 13 trillion to 13.5 trillion rupees by the end of the year, in line with the estimates.”The old notes of 500 and 1000 rupees which have been returned back to the Reserve Bank and the currency chest amounted to 12.44 trillion rupees as of Dec. 10, 2016,” Gandhi said in a short news briefing.

The RBI has printed some 1.7 billion new 500- and 2,000-rupee notes, which will replace the abolished notes, Gandhi said. That is a fraction of the 24 billion individual notes that were withdrawn. Modi’s action has created a widespread cash shortage that has hit many aspects of the economy, from manufacturing to consumer demand.But Modi says it was necessary to crack down on India’s shadow economy, although Indians have resorted to ingenious ways to try to deposit their undeclared assets, such as splitting up their money and paying others to temporarily park it in their bank accounts.

The government and the RBI have vowed strict action against those believed to be trying to deposit undeclared assets, including tougher scrutiny of all deposits of more than 250,000 rupees.The RBI on Tuesday also asked banks to keep all CCTV footage from Nov. 8, in another bid to scrutinise depositors.A source at the Central Bureau of Investigation told Reuters on Tuesday it had arrested an RBI officer in Bengaluru for “unauthorised changing” of 600,000 rupees in old 500- and 1,000-rupees notes.

RBI Deputy Governor S.S. Mundra, at the same news briefing, said a junior central bank official had been “suspended” because “he was recorded to be present in a bank branch where some suspected transaction was happening.” “We have instituted investigation and due action would be taken once the details are ascertained,” Mundra said.($1 = 67.5199 Indian rupees) (Additional reporting by Abhirup Roy, Devidutta Tripathy in MUMBAI and Aditya Kalra in NEW DELHI; Editing by Rafael Nam, Larry King)

This story has not been edited by Firstpost staff and is generated by auto-feed.

First Published On : Dec 13, 2016 19:49 IST

Demonetisation: RBI says banks get Rs 12.44 lakh crore in old notes till 10 December

Mumbai: RBI today said banks have garnered Rs 12.44 trillion (Rs 12.44 lakh crore) in banned notes till 10 December, while they have issued Rs 4.61 trillion to them since the demonetisation drive began 35 days ago.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

“The old notes of Rs 500 and Rs 1,000, which have been returned to the Reserve Bank and the currency chest, amounted Rs to 12.44 trillion as of December 10,” RBI Deputy Governor R Gandhi told reporters here.

The money that various banks have issued through their counters and ATMs since 10 November and up to 10 December stood at Rs 4.61 trillion, he added.

In volume terms the number stood at 21.8 billion pieces of notes of various denominations, of which 20.1 billion pieces were of Rs 10, Rs 20, Rs 50 and Rs 100. The number of higher denomination of new Rs 500 and Rs 2,000 notes stood at 1.7 billion, he said.

Hence, while the notes surrendered have risen by almost Rs 1 trillion, cash disbursal has risen only a little since 7 December, when RBI had said that banks had issued Rs 4.27 trillion of new notes post demonetisation through ATMs and bank counters, the banned notes collected stood at Rs 11.55 trillion.

“The entire system is continuously gearing up for supporting the circulation of notes in the hands of the public. Daily, we are issuing more and more notes, getting it printed and issuing it and this will be a continuous affair. The public are requested to freely use the notes that they have in their hands rather than hoard it,” Gandhi said.

First Published On : Dec 13, 2016 18:18 IST

Preserve CCTV footages to spot currency hoarders: RBI to banks

Mumbai: RBI has asked banks to preserve CCTV recordings of operations at bank branches and currency chests to help law enforcement agencies in identifying people engaged in hoarding of new notes post demonetisation.

The Reserve Bank, in a notification issued today, said banks should “preserve CCTV recordings of operations at bank branches and currency chests for the period from 8 November to 30 December, 2016, until further instructions”.

The central bank said the move will “facilitate coordinated and effective action by the enforcement agencies in dealing with matters relating to illegal accumulation of new currency notes”.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

Earlier in October, the RBI had asked banks to cover the banking hall/area and counters under CCTV surveillance and recording and preserve the recording to help identify people abetting circulation of counterfeit notes.

After demonetisation, there have been reports of hoarding of new currency notes by unscrupulous elements at various bank branches across the country.

The Income-Tax Department is carrying out raids across the country on a regular basis since demonetisation to nab new currency hoarders and several people, both individuals as well as bank officials, have been booked so far for carrying out such illegal activities.

The government has said abolishment of these high denomination banknotes is intended to bring back unaccounted money into the system, curb fake currency circulation as well as to deter terror financing.

First Published On : Dec 13, 2016 17:38 IST

Shift to cashless after demonetisation: RBI not for cut in debit card charge

The RBI is not in favour of cutting debit card charges aggressively, a proposal the government has made to the regulator, as it thinks such a move will impact the banks’ businesses negatively, according to a report in The Economic Times.

The proposal to reduce the charges was made by the government in various meetings and video conferences it held with the RBI officials and bankers.



The move is aimed at smooth transition into cashless economy after the demonetisation of Rs 500 and Rs 1000 notes.

The government has already waived the charges until 31 December this year. The government now wants to either cut the charges more aggressively until 31 March 2017 or just do away with them completely.

According to R Gandhi, one of the deputy governors at the RBI, the move is likely to render business unsustainable for the banks.

The charges mentioned here is the merchant discount rate , which the central bank had capped at 0.75 percent for transaction values up to Rs 2,000 and at 1 percent for transaction values above Rs 2000. MDR is the merchant fees for debit card transactions.

Card payments are indeed a complex process for banks. A simple grahic below (source RBI concept paper) explains how the transaction flow in a four-part model card networks.


“When a customer makes a transaction using cards at a merchant establishment, banks are the ones which incur a cost to process the transaction. MDR helps them compensate for this. That is the reason why the banks are not very happy about extending the MDR waiver,” explains Kalpesh Mehta, partner, Deloitte India.

An earlier report in The Economic Times had said that bankers see Rs 1000 crore loss if the government forces them to waive off the charges or extend the present waiver beyond 30 December.

“The government is in a hurry. Banks are requesting the government not to sacrifice commercial considerations,” a payments industry official has been quoted as saying in the ET report.

It seems the banks will have to make a few sacrifices as India transitions to the cashless mode.

First Published On : Dec 12, 2016 14:26 IST

Demonetisation: Is meta-corruption and ‘jugaad’ getting the better of good intent?

Since 8 November almost 12 lakh crore in demonetised notes have been deposited into banks, the RBI recently said at a news conference. On Friday, while facing some tough questions on shoddy implementation, the Centre admitted before the Supreme Court that it did not expect 80 per cent of the scrapped currency to return.

We must be cautious here. Return of the money into the banking system does not mean that demonetisation has failed. Indeed, economists such as Surjit Bhalla of The Observatory Group, a New York-based macro policy advisory caucus, has stressed that even if all of the devalued currency were to return, tax revenues will jump and therefore the move would have achieved its objective.

Be that as it may, if we narrow down on the gap between the government’s hope and reality, it reflects a mismatch that should be scrutinised. It ought to tell us two things. One, the government perhaps underestimated the innate Indian talent for jugaad. Two, meta-corruption seems to be at work. When the tools of cleaning a system are also corrupted, any effort at cleansing the system is likely to face resistance.

A file image of people queuing in the line outside ATM. ReutersA file image of people queuing in the line outside ATM. Reuters

A file image of people queuing in the line outside ATM. Reuters

Black wealth isn’t just top-down corruption, it permeates nearly every strata of the society to create a parallel, rent-based system. Everything moves subject to greasing of the palm. It divides the nation into bribe givers and takers. While the economic repercussions serve to keep a major part of the population poor and out of the development loop, black money is also a moral hazard. While fighting this systemic problem, regulation can only serve a limited role. Unless the risk of generating black money exceeds its accruable benefits, hoarders may find ways to beat the system.

Critics and experts have hence warned the government that demonetisation must be seen as the means to an end, not an end in itself. It must be followed by structural reforms such as simplification of income tax, revoking of stamp duty, etc, to trigger a behavioural change. Since demonetisation’s success is also dependent on whether or not people see this as a personal battle against graft, Prime Minister Narendra Modi has repeatedly tried to vest the ownership to individuals, urging, almost imploring them to take up the cudgels on his behalf. Simply put, Modi has invested huge trust on the collective will for this radical policy to succeed.

Was he wise in doing so? Let us consider some pointers.

According to latest government data for fiscal ended 31 March 2012-13, only one percent of all Indians pay income tax. This was revealed when the Centre this year disclosed as part of a transparency exercise direct tax data for the last 15 years. According to a PTI report, a total of 2.87 crore individuals filed income tax returns for that year, but 1.62 crore of them did not pay any tax — leaving the number of taxpayers at just about 1.25 crore which was close to one percent of the country’s total population of about 123 crore at that time.

While this doesn’t necessarily indicate that a majority of Indians are dishonest, it certainly points to the fact that Indians have a complex relationship with notions of corruption and taxation.

R Jagannathan, in his Swarajyamag column succinctly explains the Indian mindset. “In the Abrahamic system, it is criminal to evade tax. Thus you are a good guy if you pay tax, and a bad guy if you don’t. The outcome is binary. In the Dharmic mindset that most Indians operate in, we both pay taxes and attempt to evade them, depending on what we think is just and acceptable. Tax is a matter of individual judgment and negotiation. Punishment for not paying tax is karmic – outside the ambit of the state.”

From temple donations, paying advance salaries, using Jan Dhan accounts of the poor, pressing the unemployed youth into service as money mules, using bank accounts of relatives to park unaccounted cash to buying and cancelling high-value train tickets, demonetisation has sprung some really innovative ideas.

While this is one part of the problem, the other part is plain dishonesty. Ever since the high-value notes were decommissioned, some duplicitous bank officials have conspired with the rich and corrupt to launder their existing black money and almost simultaneously create a pool of fresh black wealth even as the honest majority stood for hours on end in fruitless queues to get access to their daily quota of own legitimate cash.

In report after report, we find unscrupulous individuals subverting the system in collusion with some bankers to turn their black money into white. Livemint gives details about the biggest seizure of black money on Friday since the demonetisation, with I-T officials confiscating about Rs 106 crore in cash and 127 kg in gold from a Chennai businessman and his associates. In two other raids, the I-T department found Rs100 crore in an Axis Bank branch in Delhi, and Haryana police officials caught three men with Rs 17 lakh in new currency notes, according to the report.

A cartel that converted black into white with a hefty 35 percent commission was caught in Mumbai, a fake currency racket was busted in Hyderabad, a doctor in Kolkata’s tony Salt Lake area was found hiding wads of new Rs 500 and Rs 2000 notes worth Rs 10 lakhs in his chamber while I-T raids in Bengaluru unearthed Rs 152 crore of unaccounted wealth in new notes, old notes and bullion. In between, Enforcement Directorate has arrested two managers of a private bank for assisting the corrupt in laundering money. The picture isn’t pretty. We can only imagine the extent to which laundering has gone undetected.

These cases reduce the moral strength of the fight against black money. People, who have been very patient so far and have withstood extreme inconvenience with a degree of support and stoicism, may soon be feeling disillusioned. While previous opinion polls had indicated huge support in favour of demonetisation, fresh data from a new opinion poll suggests that the public support may be waning.

According to new data from a Huffpost-BW-CVoter opinion poll, “proportion of people who said that the pain of demonetisation was worth the stated aim of curbing black money continued to fall for the third straight week, while in semi-urban and urban India, support that was growing might now be reversing. Support fell the fastest among the poor and the middle class, and fell slower among the rich.” The poll’s margin of error is +/- 3 percent at the national level and +/- 5 percent at the regional level.

While demonetisation is an ongoing exercise that may throw new revelations each week, these findings do indicate that the government has less space to play around with unless some stability is quickly restored. Is corruption getting the better of good intent?

First Published On : Dec 10, 2016 17:02 IST

Manmohan Singh’s warning to Narendra Modi: Is demonetisation already a ‘mammoth tragedy’?

The choice of words of Manmohan Singh, former prime minister and an economist, for his column in The Hindu on demonetisation impact on India’s economy, beginning with the title, Making of a mammoth tragedy, should worry the average Indian. Even if one tend to discount the politics of Singh’s article, the former RBI governor’s warning on an impending economic crisis, that according to him, will mainly hit the poor, is worth paying a great deal of attention by his successor in PMO, Narendra Modi.

Singh begins the piece by lauding Modi’s intention—addressing black money, fake currency problems—but later goes on to say that what he has done to achieve this task will not only work but its ‘unintended consequence’ will harm the poor greatly. Singh said. “All black money is not in cash, only a tiny fraction is. Against this backdrop, the decision by the Prime Minister is bound to have obverse implications by causing grievous injury to the honest Indian who earns his/her wages in cash and a mere rap on the knuckles to the dishonest black money hoarder.” Singh, who had just recently warned about a 2 percent GDP decline following demonetisation, ends his article saying “It is my humble opinion that we as a nation should brace ourselves for a tough period over the coming months, needlessly so.”

Prime Minister Narendra Modi. AFPPrime Minister Narendra Modi. AFP

Prime Minister Narendra Modi. AFP

Is the former PM overstating the short-term pain caused by the demonetisation calling it ‘a mammoth tragedy’, launching a political attack intended to bulldoze a massive economic reform shouldered by his political rival–something and a missed opportunity for his government? Or is it an important caution from an economist-cum former central banker that should be an eye-opener even to his political enemies and the finance ministry?

It is too early to talk about the actual impact on the economy and its various stakeholders from the artificial cash crunch that is a consequence to PM Modi’s massive currency crackdown that has parallels in India only to the 1978 currency ban by Morarji Desai Government. But, some indications have begun to flow in, which indeed shows things have taken a bad turn for the economy though no one is sure how things will pan out from this point.

Let’s look at the available data so far and try understanding Singh’s caution.


The demonetisation announcement happened on 8 November. The only real numbers that gauge the economic activity in the month of November that is out is the Nikkei India Services Business Activity Index for manufacturing and services sectors. This is an important index economists and central bank track to fathom the trends in these key areas. The services sector PMI sharply fell to 46.7 in November from 54.5 in October—that is the biggest monthly drop since November 2008, just two months after the global financial crisis hit the economy following the US investment bank Lehman Brothers going bust in September. A reading of PMI above 50 typically shows economic growth, while a figure below 50 indicates contraction. “The latest set of gloomy PMI figures for the Indian service sector shows that companies were heavily impacted by the 500 and 1,000 rupee notes ban. Cash shortages resulted in fewer new business intakes, which in turn caused a fall in activity and ended a 16-month sequence of expansion ,” said Pollyanna De Lima, Economist at Markit and author of the report.

A decline, though not to this extent, was seen in the manufacturing PMI as well with the index shrinking to 52.3 in November from October’s 22-month high of 54.4. But, the PMI numbers do indicate both manufacturing and services have taken a major hit in November. One needs to wait and watch how things will pan out from here on when more data comes.

November auto sales

Then we have the auto sales numbers, which is a good indicator to know what is happening on the ground. According to PTI report, the vehicle sales across categories registered a decline of 5.48 per cent at 15,63,665 units, from 16,54,407 in November 2015. It is the steepest decline in 43 months when total sales had declined by 7.75 per cent in March 2013. Two wheelers and commercial vehicles are the segments that are hit most. According to Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales last month were at 2,40,979 units, as against 2,36,664 in November last year. Domestic car sales ticked up to 1,73,606 units as against 1,73,111 in November last year while that of commercial vehicles (CVs) was down 11.58 per cent at 45,773 units in November, SIAM said. According to this report, total two-wheeler market sales dropped by five per cent, with market leaders like Hero MotoCorp and Bajaj Auto witnessing major fall. Hero MotoCorp sold 4,79,856 units of two-wheelers in November, marking a fall of around 12.9 percent year-on-year, while Bajaj Auto saw sales dropping by 12 percent in November, and others reported a flat growth.

The RBI cues

The RBI’s approach to the demonetisation impact on the economy is bit perplexing, but the obtrusive caution is hard to ignore. In its latest bi-monthly policy review, the central bank has already cut the FY17 growth forecast to 7.1 percent from 7.6 percent, but not taking into account the full impact of demonetisation shock. “The withdrawal of SBNs could transiently interrupt some part of industrial activity in November-December due to delays in payments of wages and purchases of inputs, although a fuller assessment is awaited,” the RBI said.

The RBI indeed acknowledges that there’ll be ‘short-run disruptions in economic activity in cash-intensive sectors such as retail trade, hotels & restaurants and transportation, and in the unorganised sector’. But the RBI’s larger assumption seems to be that there will be a recovery beyond short –term pain of cash-crunch. “ If the impact is transient as widely expected, growth should rebound strongly.”

But the central bank too only ‘expects’ that the demonetisation effect is ‘transient’ but it is not fully sure on the actual impact. “The outlook for GVA growth for 2016-17 has turned uncertain after the unexpected loss of momentum by 50 basis points in Q2 and the effects of the withdrawal of SBNs (specified bank notes) which are still playing out.” In short, the RBI has no clue at this stage what the demonetisation will do to the economic growth. It primarily attributes the loss of growth momentum in second quarter to the downward revision and to the as yet unclear effects of note ban. This means, if things turn bad, the 7.1 percent growth projection could be revised downwards even further to 6-6.5 percent.

Job losses

There are indications of severe hit to the employments in the informal sector post after the government announced Rs 500, Rs 1,000 notes as illegal tender on 8 November. As Singh points out in his Op-ed, “more than 90 per cent of India’s workforce still earn their wages in cash. These consist of hundreds of millions of agriculture workers, construction workers and so on”. The pain and suffering of these segments, which constitute the majority is not quantifiable, but no government can shun the responsibility of massive losses in the country that is a consequence of a “well thought-out”, conscious policy action, which according to RBI governor Urjit Patel, “wasn’t done in haste”. We don’t have reliable figures on job data. But, according to a report in Financial Express, which quotes unnamed industry officials, “As many as 4 lakh people, mostly daily wagers, may have either lost their jobs or shunned work temporarily due to the lack of payment so far, and the number is only going to grow if the cash crunch persists.”

Even the Bharatiya Mazdoor Sangh, the labour wing of BJP’s ideological parent, Rashtriya Swayamsevak Sangh has raised an alarm about the huge hit on job losses. “”Under the new government, 1 lakh and 35 thousand job opportunities have been created so far but 20 lakh people have lost their jobs,” Baij Nath Rai, president of the Bharatiya Mazdoor Sangh, told The Telegraph. This is a serious situation indeed in a country where job creation is already a massive challenge. The onus, yet again, falls on the Modi-government here.

The big question is how long the pain will last. There is no clarity on this either from the government and the central bank. PM Modi talks about 50-days, his finance minister, Arun Jaitley speaks of two or three quarters and the RBI doesn’t seem to have an answer except assuring the public that there is enough cash out there and things are under “constant review”.

There are no two thoughts on the intentions behind the demonetisation exercise but when ultimately a cost-benefit analysis is done, and if the government finds little luck on recovery on unaccounted cash, the cost of this whole exercise will be enormous, far outweighing the gains that may include more people moving to non-cash transactions. PM Modi’s big task now is to ensure demonetisation doesn’t end up as a tragedy.

Data support from Kishor Kadam

First Published On : Dec 9, 2016 14:59 IST

58% of rail tickets are sold online; Who says India isn’t ready for e-monetisation?

On 8 December, 2016 while announcing a slew of rebates for encouraging digital payments, the Finance Minister Arun Jaitley gave an interesting statistic—-as much as 58 percent of rail bookings are done online. If this is true, India certainly is ready to go digital brushing aside the skepticism of the critics and detractors. He also said since 8 November, 2016 when demonetisation was announced, digital payments have grown at a healthy clip—from 20 percent of the overall transactions to 40 percent.  The 0.75 percent rebate on petrol bunk bills for digital payments is nothing to scoff at just as 10 percent rebate to electronic toll payments shouldn’t be if only to reduce standing traffic at busy tolls. Private insurance players of course would be peeved by 8 percent and 10 percent rebates offered on life and non-life premia by public sector insurers. Be that as it may, the soft digital push comes on the back of hard push i.e. leg-up to swiping machines.

Representative image. ReutersRepresentative image. Reuters

Representative image. Reuters

Banks take their own decisions on installation of ATM machines without needing any permission from the Reserve Bank of India (RBI) for this purpose. However when it comes to swiping machines aka POS machines, the call is normally taken by the shopkeepers. But the central government has cleverly shifted the initiative from them to the banks with which the establishments have current accounts. Yes, the government has urged banks to push for installation of swiping machines at retail shops that dot our landscape. To start with, it has urged the banks to install 10 lakh such machines by 31 March, 2016 on a war footing that could be daunting given the fact that the existing number of such machines across the country is only 14.6 lakh. But the SBI alone has volunteered enthusiastically to install 6 lakh machines during this short period.

The Assam BJP government has gone one step ahead and is seriously mulling whether it can make installation of swiping machines mandatory at retail establishments. While that could meet with some resistance and criticism, the central government initiative is an example of government using its persuasive power for the welfare of the nation. Banks after all know what their customers are into. If a customer is a trader, it can always call him over and impress upon him the need for installation of the POS machine at his establishment.

The wheel has come full circle. Come to think of it, banks till recently were supinely and passively offering a service to big retail establishments that they should not have— deputing their personnel for collecting cash. It sent wrong signals. It encouraged both the establishments and their customers to prefer cash as the prime mode of doing business. And more importantly, it encouraged transactions ‘outside the books’ in layman’s terms because on the flipside bulk of the expenditure was also incurred in cash that often hid the identity of the payees.

POS machines has benefits for everyone—automatic accounting at both the ends — i.e. the establishment and bank, besides rendering the tedious process of counting redundant at both the ends.  It was an eyesore to witness wads of currency notes tumble out of traders’ untidy bags in front of bank cash counters every morning.

The government must be complimented for converting the current cash crisis born of demonetisation of 500 and 1000 rupee notes into an opportunity to go digital and less-cash. The Congress party calls this rationalisation because it says initially the government called demonetisation a counter to counterfeit notes and black money. But what the heck, emphasis on cards and digital payment comes at the right time. Strike the iron when it is hot. The economy is reeling under currency shortage. Now is the time to change entrenched habits.

The government has waived 12.5 percent basic excise duty and 4 percent special excise duty on swiping machines and is likely to waive of the import duty as well given the fact that bulk of the machines are currently imported.

The Modi government indeed has cleverly dovetailed digital payments with demonetisation. And if it is an afterthought, so what?

First Published On : Dec 9, 2016 08:32 IST

Check: IBPS CWE PO Main Exam Results 2016 declared at ibps.in

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Candidates who have appeared for CWE preliminary exam of The Institute of Banking Personnel Selection (IBPS) conducted on November 20 can finally heave a sigh of relief. IBPS CWE PO Main exam results have been declared on the official website – www.ibps.inThe results will be available till December 15, 2016.Here’s how you can check results:1. Go the official IBPS site.2. Click on the link – Click here to view your result status of CWE PO MT – VI 2016.3. You will be directed to the result login page.4. Enter your registration no/roll no and date of birth/Password.5. Enter the captcha code.6. Click on login.7. You can now get access to your results.Download and save the result for future reference.About IBPS:Institute of Banking Personnel Selection (IBPS) is an autonomous body that provides services to public sector banks, SBI, banks associated to SBI, RBI, NABARD, SIDBI, some co-op banks, LIC and insurance companies.

One month of demonetisation: Let’s wait for more data before writing the epitaph

It’s been one month since the central government’s decision to discontinue high-value Rs 500 and Rs 1,000 currency notes, and an extraordinary amount of commentary has been generated in the last 30 days, most of it eager to write off demonetisation as a grand ego-fuelled failure.

Part of the anguish is understandable. The move has been hugely disruptive for an economy that was booming, and a populace unprepared to be at the receiving end of such a shock. Hardships, inconveniences and adjustment blues are inevitable in the event of such a disruptive change, but as we grapple through the temporal tremor, we must reflect whether it is too early to pen the epitaph of what must rank among the ballsiest of reforms ever undertaken.

People queue up to change their old currency notes outside Bank of India in New Delhi on Thursday. PTI Photo(PTI11_10_2016_000315B)People queue up to change their old currency notes outside Bank of India in New Delhi on Thursday. PTI Photo(PTI11_10_2016_000315B)

People queue up to change their old currency notes outside a bank in New Delhi. PTI

Vivek Dehejia, professor of economics at Carleton University, points out in a column in Livemint: “…the essence of politically difficult economic reform involves managing distributional conflict: Between gainers and losers today, between losses today and gains tomorrow, or some combination of intra-temporal and inter-temporal distributional impacts. This is the first law of political economy.”

Any analysis on demonetisation, at this stage, must take into consideration that nobody knows for sure what will happen for certain beyond educated guesstimates. An experiment such as this one, on such a scale, involving this complexity, affecting 1.25 billion people at the same time, has never been conducted before. There are simply no reference points. Even noted economists have resembled little more than punters, sometimes choosing to comment on the moral and ethical nature of the move than economic impact. Simply put, in the short to medium term, till there emerges better data and more macro-economic indicators, any “conclusive assessment” of demonetisation is more likely to be an indication of the commentator’s predilection than truth.

What is becoming clear a month into the exercise, despite the panic being spread from some quarters, is that this isn’t a Waterloo moment for Indian economy because the macro-economic fundamentals remain strong. Often, criticisms have conflated temporary trouble with lasting impact and a number of times, critics and political parties have tried to draw sweeping assumptions based on incorrect or incomplete data.

We have been repeatedly told, for instance, that farmers have been crippled by demonetisation and that Rabi crop (this being the sowing season) has taken a heavy beating, as farmers have been unable to procure seeds in absence of liquidity. And yet, latest data released by the agriculture ministry prove that far from farming taking a hit, total sown area for Rabi crop “has not only jumped substantially in the past one week, but also crossed the last year’s corresponding week figure by over 8.5 percent,” according to a report in The Times of India. The total area sown under Rabi crops (as on 2 December) stand at 415.53 lakh hectares as compared to 382.84 lakh hectare this time in 2015 — an increase of 32.70 lakh hectares, according to the report.

The gap between reality and fear-mongering could be the reason why the Reserve Bank of India (RBI), in a widely-followed press conference on Wednesday, kept the key policy (repo) rate unchanged at 6.25 percent, much to the surprise and even disappointment of bankers and the market, though its Monetary Policy Committee revised downward its FY17 growth forecast to 7.1 percent from 7.6 percent, taking into account the negative impact of currency ban.

Though a sharp reduction, it is still nowhere close to the two percent fall in GDP that former Prime Minister Manmohan Singh had envisaged recently on the floor of the House, because RBI believes that transition pangs and growth slowdown are transitory in nature. Overall, the central bank gave an indication that it would rather wait and watch than jump headlong into rescuing the Indian economy, perhaps because it may not need any saving.

As quoted by Reuters, the RBI said, “It is important to analyse more information and experience before judging their full effects and their persistence…if the impact is transient as widely expected, growth should rebound strongly.”

This is the exact sentiment put forth by India’s Chief Economic Advisor Arvind Subramanian. In an interview to Economic Times, he praised the RBI’s move not to tamper with the repo rate and repeatedly stressed on the need for studying more data before committing on the medium to long term effects on demonetisation.

On whether North Block sees RBI’s estimate of a 7.1 percent growth forecast “too optimistic”, Subramanian said, “Because there are a lot of mixed signals coming, we have to wait, assess the data. We still do not have a proper macro read. Even the first macro read of what is going on. Once we have the data, we will analyse them very carefully and come back with a more considered assessment in the days and weeks ahead. At the moment, it is not very easy to make a really definitive call on the magnitudes of all these impacts.”

Some of the commentary has revolved around the figure of Rs 11.55 lakh crore, the value of scrapped currency notes that have crawled back into the system. It is being said that the final deposit amount before 30 December deadline may well match (or be marginally lower than) the figure of Rs 14.17 lakh crore, the value of notes in circulation during demonetisation. This argument has been stretched to a conclusion that this implies demonetisation is a failure.

This is too simplistic a contention and fails to take into account one of the purposes behind demonetisation — to increase the tax base and adopt more of the informal economy into the banking network. To quote Professor Dehejia again: “…the movement of some or many of the unbanked into the formal financial sector and the movement of firms from the informal to the formal economy (or, equivalently, the process of ‘creative destruction’, whereby new formal sector firms replace defunct informal sector firms) has a permanent and positive impact on the economy, even though the gains from taxing black money via the currency swap is putatively one time only.”

Also, there is no reason to assume that black money changes colour the moment it is returned to the system. As India’s revenue secretary Hasmukh Adhia clarified recently on the sidelines of a Brics event, “Depositing the money in a bank account (doesn’t make) black money into white…it will become white when we charge taxes, when the income tax department is able to reach to them and issue them a notice”.

Overall, we aren’t even remotely close to the end of demonetisation debate. And as the discussion rages, it would be worthwhile remembering CP Scott’s immortal lines: “Comment is free, but facts are sacred.” So, let’s wait for more facts.

First Published On : Dec 8, 2016 16:06 IST

Demonetization: Mamata Banerjee slams ‘dictator’ PM Modi for man-made financial emergency

<!– /11440465/Dna_Article_Middle_300x250_BTF –>West Bengal Chief Minister Mamata Banerjee on Thursday alleged that demonetization is a manmade disaster of financial emergency caused by a dictator and said that Prime Minister Narendra Modi must clarify the situation and take responsibility for the chaos created in the last one month.Continuing her outburst against the ruling dispensation, Mamata alleged that the rule of the BJP-led NDA regime is the darkest period in Indian democracy. “What is the hidden agenda and who is the beneficiary? Beneficiaries are only the Prime Minister and his people. Parliament is liable to the people. That was not taken into account,” she said.The Trinamool Congress (TMC) supremo also used the occasion to launch a frontal attack on Prime Minister Modi and said that he didn’t care about the people but instead looted everybody’s money. “Many Prime Ministers assumed office, but nobody did this what Narendra Modi has done. It is public money, but the Prime Minister is acting as if all of this is his own. Where is the black money? This is public money that you have taken, the tax payers’ money,” she added while lambasting him for not consulting anybody before taking the decision.The TMC also questioned RBI Governor Urjit Patel’s silence on the matter. “Under the leadership of the current Prime Minister, the government is derailed completely. The RBI Governor is silent on the entire matter. Nobody is giving details on the currency notes. He (Prime Minister Modi) thinks as if he is a tiger, and the only one who is right. Everything is done in huge secrecy as if he is some Ali Baba. He should realise he is occupying a constitutional post,” said Mamata.”The RBI Governor is also with Modi ji, he should be playing his own role. People don’t know what will happen tomorrow. The Prime Minister just doesn’t respond… no reply. He only gives speeches, not answers. Prime Minister Modi must take responsibility for the chaos created in the entire one month,” she added.The West Bengal Chief Minister earlier vented her ire on Facebook, saying no black money has been recovered so far but the white money of the common people has been snatched away. “One month of harassment, pain, hopelessness, financial insecurity and utter chaos. That is all that the common people has got after the black decision on demonetization announced a month back on 8th Nov, 2016. No black money has been recovered. Only white money of the common people has been snatched away,” Mamata wrote.”Even no black money has been recovered from foreign countries. In the name of recovery of so called black money, the ruling party at the Centre has created assets in the form of land, bank deposits, gold, diamond and have become more and more capitalists. All the common people are helpless,” she added.Mamata further wrote that immediate action is necessary to restore the trust and confidence of the people on the banking and financial sector of the country. “People must have hassle-free access to their own money and feel secure that their money is safe with banks and financial institutions,” Mamata shared.”We have raised the issue repeatedly in Parliament and in different other platforms. Leading economists have criticized this mindless demonetization. But there is no response yet. PM must clarify the situation to the nation and take entire responsibility,” she added.Meanwhile, Prime Minister Modi has praised the nation for supporting the demonetization decision which he termed as ongoing yagna against corruption, terrorism and black money. In a series of tweets, he said that the government’s decision has several gains for farmers, traders, labourers, who are the economic backbone of the nation.Prime Minister Modi further said that though the government’s measure will bring a degree of inconvenience, this short-term pain will, however, pave the way for long-term gain.Meanwhile, both houses of the Parliament were adjourned for the day as an united opposition cornered the government over the demonetization move.

Demonetisation one month: What defines the success of note ban?

It is quite coincidental that the monetary cum credit review/policy came exactly one month after the grand re-monetisation scheme was announced on the 8 November, which literally shook the edifice of our economy and everyday lives.

Broadly ten thoughts come to mind when we look back over the last 30 days or so.

First, it was comforting to know that the Reserve Bank of India (RBI) has stated that it was in the loop all the time; and the entire plan was a joint effort and hence it was not the case of the central bank being involved after the decision was taken. The fact that this was overtly stated by the RBI is significant as there have been discussions on whether the RBI was part of the plan or was just told to implement the same from the top.

Representational image. AFPRepresentational image. AFP

Representational image. AFP

Second, the way this story has played out does make one infer that when the decision was taken no one knew of the problems at the ground level in handling the ATM issue. When we were told that banks and ATMs would be closed for two days, it was assumed that 48 hours were all that was needed to get them ticking. Thirty days down the line, a large number are non-operational even in a place like Mumbai. Further, the calibration process was too slow and it looks like that it was not quite thought through as the size of the notes issue had to also be addressed. The absence of queues in front of the ATMs is more because of there being no cash available (and when ticking, dispersing Rs 2,000 notes which have low transaction utility).

Third, the way the new notes had been rolled out was quite puzzling as releasing Rs 2,000 denomination before Rs 500 appeared to be either a major slip up or there was a strong undisclosed reason for the same. If it is the latter, then it should be spelt out. Also, the RBI has stated in the press conference after the credit policy that they were not considering printing Rs 1,000 notes while at the time of the announcement of demonetisation, it was stated that the Rs 1,000 denomination would be considered in course of time.

Fourth, the fine tuning of policies relating to exchange and withdrawal appeared to give the impression that the authority did not quite anticipate the way in which their system could be gamed. Allowing Rs 4,000, Rs 4,500 and Rs 2,000 exchanges per day, which was laced with the indelible ink by the end of the scheme, was addressed by the black money holders by keeping agents in lines through the day across various branches. Finally, the exchange scheme was withdrawn. The gamers were always several steps ahead and used jewelry purchases and agents to beat the system. The most astonishing move was to get to activate dormant ‘Jan Dhan’ accounts which were an innovation in the art of dodging the tax authority. The government will have a challenge on hand in addressing this issue.

Fifth, the public has been running amok trying to understand these rules. At times one can withdraw Rs 20,000 from a branch while on others it is Rs 24,000 per week. But at the ground level most banks do not allow this and ration out amounts. Further, after assuring the people that deposits of up to Rs 2.5 lakhs will not be questioned, the government has gone three steps back and warned that no one can take this for granted. Hence, there is fear of undue harassment from the tax authority at a later date.

Sixth, almost as a threat with undertones of a plea, the government has got in another income disclosure scheme and after initially floating the idea of 90 percent tax cum fine has brought it down to 50 percent. This is another desperate measure to get the money out and have people disclose black money.

Seventh, while almost everyone who works in air conditioned offices have praised the scheme and projected that we will all go digital and this is the only way to do so, there have been dissenters. Hence, all corporate honchos have backed this to the hilt and have given their examples of how they use cards, internet and the ‘famous’ e-wallet to pay their maids, vegetable vendors, etc. The clan of economists have spoilt the party by calling this an exaggeration and have drawn up their estimates of how output will be affected as spending has stopped, manufacturing affected and several workers have been laid off. The net result can be a fall of between 0.5-2 percent in gross domestic product (GDP). This debate still goes on, but at times the twist in the argument is that this re-monetization is to make the country go digital and away from cash with assault on black money being a secondary effect.

Eight, the banking system and RBI was caught off-guard as the flurry of deposits led to surpluses with banks with no avenues for deployment. When business is down, no one borrows. The RBI did not have enough securities to sell in the reverse repo auctions and in a panic situation increased incremental CRR to 100 percent. While banks squealed as a default would mean loss of license, the idea of MSS bonds came up to provide support which will restore equilibrium.

Nine, the RBI has set to rest the debate on what would happen when money gets stuck in the system. It was conjectured by critics and analysts that it would get transferred to the government as surplus. But the RBI has clarified that this will not be so and the amount will reside on its balance sheet without status of legal tender.

Ten, even after one month, people struggle to get money from banks. When it is possible, it is a Rs 2,000 note which is hard to exchange. However, surprisingly there has been no protest and the true Indian spirit has taken it in the stride. As it has been projected as being a scheme that attacks black money which has been eroding our economic fabric, people are willing to be inconvenienced if it means that a larger good is achieved in future. This is a big positive considering that the majority does believe in this measure and are prepared for this sacrifice.

But two things need to be seen. First is: How would we evaluate the success of the scheme? Will it be in terms of the gains in revenue relative to loss of GDP? Or will it be the measure of currency lost in the system? Or is it the time taken to get back on our feet. This would be an interesting analysis after December-end.

The second is a concern. With the flow of deposits increasing and the sense being that not much currency will actually slip out of the system, there is a fear that the taxman could harass several tax payers asking for proof of money out in the bank. There is already some talk of the government gunning for gold with households.

(The writer is chief economist, CARE Ratings. Views are personal)

First Published On : Dec 8, 2016 12:27 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

Media uninvited to RBI Governor Urjit Patel’s press meet cries foul

Mumbai: Reserve Bank of India Governor Urjit Patel’s second media meet on Wednesday created a controversy with a section of the Mumbai media corps complaining they were either not invited or deliberately kept out of the briefing.

RBI Governor Urjit Patel. PTI

RBI Governor Urjit Patel. PTI

Some even took to the social media networks to vent their grouse over being ignored for the much-anticipated event here on Wednesday afternoon.

Among those media persons denied entry to the venue and aggrieved by it was The Economist‘s correspondent Stanley Pignal who tweeted: “Amazing stuff. The Economist US no longer invited to the RBI policy meeting press conferences. Won’t let me in. Sad day for transparency.”

Even the Associated Press, Agence France-Presse, BBC and certain other global agencies/television channels were allegedly not invited or kept out.

At least one news agency, which has always been invited barring this time, is understood to have formally raised the matter with the RBI.

Mincing no words, Pignal said: “I’ve been critical of the new Governor not speaking to the press, did not expect RBI to freeze us out of press conference. It’s their call obviously.”

He quoted a RBI spokeswoman as saying that the decision to exclude him had nothing to do with The Economist‘s critical coverage of demonetisation.

Pignal added it was amazing that from being granted interviews of the (former) RBI Governor in June, it came down to being excluded from press conferences in November without warning or explanation.

Despite repeated attempts by IANS, members of the Reserve Bank of India (RBI)’s official team of spokespersons were not available to give their version of the incident.

First Published On : Dec 8, 2016 08:48 IST

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