The Euphoria: Aftermath!

Now that finding long queues outside ATMs and banks has become a norm, I sometimes wonder what is all this going to give us in the long run and will those returns be able to justify the cost of all the people lining up in queues to be able to withdraw their own hard earned money? Well speaking out one's mind in the public is not a good idea anymore, I presume. I heard the news of someone being roughened up by people, outside an ATM queue at Delhi, when he casually commented about the futility of this demonitization drive. I truly want to believe that the feeling of nationalism got the better of him. However standing day in and day out in long queues just get a few wads of ones own money must have been a harrowing experience for him.

Apart from the demonitization, what has been an added flavour to the whole exercise is the almost daily announcements and declarations from the people in power specifying in various degree about the money. These announcement could be anything from the amount that you could exchange to the amount that take out in a day or week and now the amount of old currency notes that you can deposit in your own bank account. 

Is the Black Money Already White?

Well yes, if you have not heard of it till now, this one is the latest of the of the Firmans! Now you cannot deposit more than Rs. 5000 currency notes in your own account. In case you still want to deposit more than that amount you will have to give a statement as to why you had not deposited the same till now. Just imagine! When the prime minister had announced that we could deposit the money in our old currency notes till December 30, 2016, why this new announcement which is against what the prime minister promised us on November 8, 2016, during the demonitization speech?

To a common person like me, it could only mean one thing. The hypothetical scenario that I used to wonder has actually come true! During the initial stages of this drive it was assumed that out of the Rs. 15.7 Lakh Crore of demonitized currency notes most of the money would never get deposited to the banks as it could all be the black money. I had wondered all throughout, what would happen if somehow the deposits were to overshoot this figure somewhere to the tune of one to two lakh crores? In such a scenario the government would actually be helping people with black money to get their black currency notes converted to white money. The silence of unrest may actually be a result of the antisocial elements working double time just to get their fake currency notes changed to new.

Just imagine, the whole exercise to put a curb on black money being used as a piggyback to convert that very black money into white! And the worse thing, this part of the black economy may actually have been sourced from the enemy countries. It could be grave with much serious implications for the whole economy. The RBI chief putting in curb to the fresh deposit of old currency notes, even by defying the declarations as made by the prime minister may actually mean just one thing that the RBI believes that such a scenario in not totally unfounded.

Will the Demonitization Drive Increase the Common Man's Confidence in the Banking System?

Leaving out the discussion on economics, black money and all out, there is yet another point that ponders in my mind. Will this exercise actually increase the confidence of a common man on the banks and the banking system or will that person be much more averse? 

Think about a small farmer who has starting banking with one of the Cooperative Banks. No, not of choice but because of the dearth of choice that he has. All the money that was deposited in his bank account has been sealed for over 40 days now and he see no respite in being able to withdraw any amount what so ever. I cannot imagine him being more confident in using the banking system anymore, once he is able to withdraw the complete amount.

If the example above seems to be a bit unreasonable, think about a poor man who has recently been introduced to banking, will all this effort of standing in long queues to be able to withdraw barely two thousand rupees from an ATM instill confidence in the banks and the banking system?

Thirdly, those who have been regular users and old customers of banks, imagine their agony in getting small withdrawals from their own accounts at times of marriages or medical or other eventualities in the family. Can we expect them to be more confident in the banking system after the current demonitization drive? Leave aside the banking system, their confidence in Indian currency may also falter. Those who can afford it may even look at keeping money in foreign currency to avoid such inconvenience in future. And that would be detrimental for the country in the long run. It would lead to an added foreign currency burden on the nation.

Is All Cashless Transactions Necessarily White? 

With the changes in the narrative regarding the objective of the demonitization drive the latest version is that of making the country cashless or less cash dependant. The question remains, is all cashless transactions necessarily white? I believe not, even the Government has not claimed that. However, the Government does believe that if most of the transactions become cashless then every transaction shall leave behind certain cyber trail which can be caught up with, thus ensuring transparency in the system. Still, the question remains as to how many people and how many transactions can be made cashless and is a forced transition the best option to move India towards a cashless path. 

I know, many people will learn to use the e-transactions and certainly a lot of the otherwise regular cash transactions will become cashless, but the issues of cyber security remains a big alarm. We recently had the Central Bank of Bangladesh looted by unscrupulous agents and millions of dollars were siphoned out of the system by some unknown actors. Just think about the vulnerabilities to which we might be exposing our semi-literate to illiterate population. Further, I believe, the stepped up brief regarding cashless to less cash society is nothing else but a face-saving exercise in light of the inability of the Reserve Bank of India in anticipating the chaos that has been created by sucking out the cash liquidity from the economy and the complete system. This may just be a move to ensure that the small business owners may not die an untimely death.

Remember the Bitcoins!

A bigger question which if I may pose at this juncture would be, with all this chaos in the system of demonitization and all, and the upwardly mobile also looking up for other foreign currency options for keeping their liquidity intact; how can the system ensure that the black transactions shall also not move to a more secure black currency, namely the bitcoins. Bitcoin is a secure online money which is not registered with any country and it does not leave behind any money trail and thus can hardly be tracked. Since it is not registered with any country, it does not involve any kind of direct taxation and thus is completely tax free. 

Recently, there have been reports of ransom calls to various organizations across the world, and even in our own Mumbai and Delhi, where the ransom has been asked to be paid in bitcoins. As per the report published in the economic times on January 11, 2016 one bitcoin was valued at Rs.30,000 each and since a bitcoin is an online currency, it can be traded in any fraction. By pushing the complete ecomony towards cashless transactions, let's hope that we do not push our black economy to start trading in bitcoins and make it totally out of our reach.

A lot of things have already been written about the impact of demonitization on the various sectors in the economy, thus I thought it right to touch upon the aspect to which I am still to come across in the media. I hope the Government takes cues and do the needful so that we do not end up losing more in this fight against, well, whatever you may like to call it!

The Demonitization Euphoria

The only one thing that keeps coming back in most of the discussions now-a-days is the demonitization debate. I remember the first time I heard our prime minister announce the delegalization of the transaction through currency notes of Rs.500 and Rs.1000 from the midnight of the same day, I was ecstatic. Never before had such an unprecedented move been dared by a leader. I. like many others, considered it to be a masterstroke by the most popular Indian leader currently in the world. However the euphoria was soon to die down in the wake of the aftermath it entailed.

I had always been a 'cashless' person depending largely on the nearby ATMs to fill in my pockets, just sufficient for the week's requirement. Just as always, I had withdrawn just about enough to last me for the week from the ATM the day before and had paid for the monthly salaries and utilities in the morning. The next morning, it was different, I had one or two hundred rupee notes and a few tenors when I realized that all the bigger notes which were so easy to carry had lost their value. But I knew that the morning milk and bread could be managed and my bigger notes could still get my car tanks full. So, I was a happy man. Definitely, I was sure that after what prime minister Modi had done, people like me would be happy in the times to come, while those having bagful of black money would all be toiling hard in front of the banks and other places trying to hide their ill got wealth.

I saw a few television channels showing distress calls about the problems some people were facing out there due to the missing currency notes to spend. But obviously, it must be the people out there in the rural pockets of the country where the banks and banking facilities like the ATMs were not installed out of fear of it getting robbed in midnight, I thought. Those day passed and so did a few more and finally  I was pushed to the edge that I needed some cash in my purse. So happily in the evening, I jogged to the nearby ATM and it was closed, so I walked a few more blocks to find the other close-by ATMs out of cash. Maybe it was not a good day after-all and then people do tend to withdraw cash during the day and so naturally the ATM may have run out of the money I thought.

So next day, instead of starting work, I thought of making a trip to the ATMs and this time with my car. I moved from the first ATM to the second and the next and then the next, almost all were deserted and those where I could locate a guard, I could see him waving out from quite a distance that there was no cash. NO CASH? I mean where could all that cash have gone? I mean, how could it be, was my initial reaction. I have money in the bank and the ATMs are supposed to give me that money anytime and anywhere that I demand and that there can be no power in the world to deny me the right to take out my own money. But ho! Who is listening anyway? The money was not there in the ATMs and gradually I realized that the money was even not there with my bank. I was living out in a fallacy that I could tide over this demonitization crisis and that it was a masterstroke. It had struck me and I was all caught unaware.

I had to move around from queues after queues trying to figure out where could I gain access to the limited supply of cash that the government had allotted for my family's weekly consumption. I was a bit annoyed but would find solace in the thought that what all I was doing was for the good of my country, maybe a bit long term good as now our leaders would explain. At least all have been brought down to the same level of living standards by the currency rationing, for the time being. The rich would be the worst hit, I was still sure, by this socialistic, okay maybe communist, policy.

As the days passed, I could find my vegetable vendor all deprived of the freshness. The other vendors who used to set up their small stalls of tasty streetfood started dwindling. The car cleaner who also doubles up as the vendor for ironning the clothes could be found idling around most of the time during the day. He tells me that there has been a steady decrease in the number of clothes that comes for ironning to him now. As for me, I have found a sweet little ATM where I am able to withdraw two thousand rupees in cash by standing in a queue for just about an hour and a half.

Awash in red ink

Will it sound a tough times ahead for agriculture and the industry in securing loans? With most of the banks seeing red in their account books, where is the money to finance new ventures?

Awash in red ink: Ayear since the Reserve Bank of India ended regulatory forbearance — the norm that allowed banks to avoid treating restructured loans as sub-standard — the pile of stressed assets at lenders has grown