What after Demonetization?

Image 1This is the ‘question of the year’, something that has left politicians assuming the role of economists, economists assuming the role of panelists. What after 85 percent of currency in circulation being stripped of its legal tender status, what after liquidity being sucked from market, what after record fall in commerce, and the most crucial of all- Will India’s parallel economy breakdown?

Many experts, politicians-turned economists, even self-styled financial analysts have given their verdicts; the common man, however, is puzzled, the size of queues hasn’t yet reduced. What about a breather from prime time discussions and diverse commentary on the subject and talk some basics.

The demonetization endeavor is done and it is time to look ahead, to think of prevalent and upcoming threats and opportunities.

The general public is at unease and this is undeniable. Hence, the government has to undertake steps to ease this pain and prevent seepages through measures that are feasible yet are being unheeded. Placing restrictions on bank holidays for a month or two and increasing working hours (something that has to come proactively from banks) is warranted.

Normal banking functions like clearance of cheques and deposition of life certificates by pensioners have been left hampered and overdue due to increased stress on cash deposit and withdrawals and owing to limited hours of work. Although the delivery of bankers in past one month is appreciable, there is a valid reason to seek their extra labours at this crucial time of need.

While the general public is ending up unserved/ underserved in queues, there are heaps of new currency notes being unearthed by authorities. Chief Vigilance Officers of banks and related staff are out of picture at a time when banks are abetting money laundering.

As per latest reports, old currency notes valuing approx. INR 12.44 lakh crore have been deposited by the public. Also, more than INR 4.6 lakh crore is the value of new currency issued by RBI for enabling withdrawals by public. Of the total amount deposited in old currency a large component comprises of idle cash lying with households.

Not all the remaining balance of INR 7.8 lakh crore will hence be demanded as not everyone will feel the need to pull out entire sum of money deposited. Moreover, if all INR 7.8 lakh crore will be withdrawn, there lies no logic in hailing high bank deposits that will be used by banks to extend credit in upcoming days.

The question is ‘Why are still such large crowd outside banks and ATMs?’

There is a clear cut indication that bank and post office officials, if not all, some are involved in providing a backdoor channel. This is to be checked via audits of branches, clear indications to branches to display amount of new currency received and withdrawal requests honoured on a particular day, placement of in-house vigilance teams and unexpected raids to check disbursement records.

Also, bank branches are implementing self-created rules like allowing only home branch customers to deposit/ withdraw cash, which has augmented the pain of migrant workers. Strict guidelines should flow from RBI to curb such practices.

When this demonetization drive is so crucial and has a bearing on lives of all Indians, there is ample reason to set accountability of those not accomplishing their jobs and to book corrupt officials under treason.

A control room with easily accessible phone number and email id, similar to in cases of disasters, is to be made available sooner than later to let people raise concerns and report any wrong-doing in banks and post offices. Banks and post offices alleging false cash unavailability/ shortage must be booked.

Also, when shortage of new currency is a known fact, any stockpiling beyond a particular amount, say INR 10 lakh, in new notes must be made unlawful, with clause of imprisonment and stringent penalties.

To tackle queues, ATM withdrawals must be rationed with one withdrawal allowed in a week, and weekly withdrawal at branches limited to INR 10,000 till adequate new notes are available.

In the wake of recession and declined job growth due to cash crunch, the government should not only probe ways to increase public spending but also extend a helping hand to businesses in their repayment of interest on loans, besides coming up with pragmatic income tax rates, for say not exceeding 20 percent.

When the economy is moving toward transparency in transactions, income tax net is bound to increase, hence lowering tax burden, thus discouraging people from using unfair means to evade taxes, seems a viable and profitable option.

A banking transaction tax of 2 percent can be an answer to the complex structure in country, something that will serve multiple outcomes in a single measure. While the dream to make the country cash independent and generate trail of all transactions through digitization of payments will be sure products, tax incident will be both broader and reasonable.

It cannot be ignored that while a cashless Indian economy is being foreseen and has become the most talked about topic, the execution is both time-consuming and to be made a success, it has to be wisely explored, and made sustainable.

ATMs deployed by banks at an unprecedented scale in past one decade are an apt model of fiasco and a reason to be cautious. Half of them are dysfunctional at any given time; core banking has always been a failure with banks returning unserved customers every now and then alleging breakdown of servers.

The infrastructure of cashless India, thus, has to be made foolproof, leakages of sensitive account details has to be made a thing of past. Otherwise, it can be similar to running a bullet train on same worn-out tracks and broken down signaling system.

Image 3Financial literacy of Indians is to be amplified, and ways and means to promote cashless transactions have to be located with farsightedness. When government talks of waiver of Merchant Discount Rate, any loss incurring to banks must be compensated from PM Garib Kalyan Yojna accruals.

On a separate note, it is beyond understating that while a platform like Paytm increased users and transactions manifold since November 8, UPI, promoted by NPCI, failed to attract users. Also, lack of enthusiasm in promoting banks’ own e-wallet must also be probed.

Tasks are many and recalling of currency may be hailed as bold, it cannot be termed as the final nail in the coffin. PM Modi has two more years to deliver his part; in 2019, he will be assessed on pragmatism by the public he is educating, not on rhetoric.

99 thoughts on “What after Demonetization?

  1. Basant Tomar

    they will be banned from even asking for votes soon..if nothing changes in next 6 months.. time to go home for BJP and company…

    The biggest question is:whats the main motive behind demonetization and when will it become visible??

  2. Jay S. Mendon

    Demonetization helped only Political parties, Politicians , Rich and Powerful Corporate , MNCs, Bankers, Cops, Underworld, Terrorists , Black money created more Black money , only currency changed. 90% people suffered in the process of Demonetization. Tremors will be felt in the economy.

  3. Rama Nambi

    In an atmosphere of heated discussions,where,everybody pushes their view point,relevant or other wise,the average aadmi is less clear on these.May be some clarity could emerge after the first week of January,2017.

  4. Chandra Sekhar AKNR

    Demonitisation is a catalyst (or an eye opener) for next generation of monetisation. This is a big shift from normal approach of real cash in hand vs virtual cash in hand. If we need to compare with bygone times, may be there were similar issues when civilizations moved from Gold and Silver to currency notes or much earlier, when currency is introduced in shells and seeds.

  5. kajal shukla

    I dont thing government help politicians this is a masterstroke of PM pannel but all thing they cant be disclose in public so just wait & watch for result


    The government needs to do lots of things to keep the faith/trust the people has placed in the PM’s action including keeping an eye on the functioning of the Banks via RBI.Heard a rumour too recently that the political parties have been given the freedom to deposit any amount of old currency note in their accounts.If it is true then once again the general public has been taken for a ride. Sad for all of us.Praying it is a rumour only.Thanks


    We have full confidence , and we hope it will be delivered, if not in this term than the next term and the next and the next and the next term, we are confident he will deliver. And Achay Din Ayangay


    every action will always have 2 sides so don’t be judjemental on every govt. move but you look all the money which was parked in bunkers are now in bank system even some persons are converting new currency henceforth it will not be easy for any one to store, so keep fingers crossed buddies

  9. Siddhant Anand

    A fascinating discussion is worth comment. I do believe that you need to publish more about this subject, it may not be a taboo subject but typically folks do not discuss these subjects. To the next. Many thanks..

  10. Abhinav Singh

    People are in favour of demonetisation of high currency notes but yes they are facing trouble. Government should have ensured that after November 8 everyone could have conveniently deposited money and got new cash.

  11. Bharat Raj Gujjari

    Government will never win 2019 elections because they failed in implementing note ban correctly. Rich have converted their black money and poor have no cash now.

  12. Achint Parekh

    Sad that paytm has such high customer base and bank appls have got no real user base. Paytm should be blocked because it is backed by China.

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    Thank you, I have just been looking for info about this subject for ages and yours is the best I have found out till now.

  14. Devnarayan SINGHANIA

    Never have Indian bank atms functioned properly. Most of the times they are dysfunctional and at others there is no cash. Why are officials responsible never suspended?

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    An intriguing discussion is definitely worth comment. I do believe that you ought to publish more on this issue, it may not be a taboo matter but typically people do not speak about such topics. To the next. Cheers..

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  22. Hiren Yadav

    BJP is a party of rich people who have converted their illicit wealth. Aam aadmi is facing the brunt of demonetisation by standing in queue and getting no or less new cash.

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  25. Jeremy Dsouza

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  31. Gaurav Toksha

    Even now when there are evidences against bank officials no bank chief has come forward to accept failure. Public sector bank managers made enormous money from this move.

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  35. Collin Dsilva

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  37. Hirendrasinh Rathore

    Opposition will be opposition. Now because they have no reason to blame Modi they are using common man pain in queues to target the prime minister.

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  44. Pankaj sahu

    What benefit will the country have when commerce has dipped so much and there is lack of jobs after note ban. India has gone decades back after this foolish decision.

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