ATM cash crunch: PMO takes stock; Madhya Pradesh hit for 3rd day; updates

A cash crunch at ATMs has hit a dozen states, including Uttar Pradesh, Madhya Pradesh, poll-bound Karnataka, Telangana, Andhra Pradesh, Bihar, Gujarat, Maharashtra, Rajasthan, and Punjab. While the Chhattisgarh Chief Minister said his state, too, was facing a cash crunch, with the crisis expected to pass shortly, bank authorities in Jammu & Kashmir and the government in Maharashtra said their respective states were not facing an ATM cash crunch. With automated teller machines (ATMs) drying up, the central government and the Reserve Bank of India (RBI) stepped in to address the currency shortage.

Finance Minister Arun Jaitley attributed the cash shortage to an unusual spurt in demand during the past three months and described it as "temporary", adding that the ATM cash crunch was being "tackled quickly" and that there was "more than adequate" currency in circulation. To fix the ATM cash crunch, the government said that the printing of Rs 500 denomination notes, about 5 billion of which are printed per day, would be increased by five times. Notes worth Rs 700-750 billion (Rs 70,000-75,000 crore) would be printed in a month.

However, what caused the cash crunch and ATMs running dry in the first place? The suspected hoarding of Rs 2,000 notes was cited as one reason by the government. The RBI, for its part, said that logistics and recalibration issues were limiting cash replenishment at ATMs. Further, Finance Minister Jaitley said that the "temporary shortage" was caused by a "sudden and unusual increase (in demand)" in some areas and that it was being "tackled quickly". With the RBI and banks blaming cash management companies for ATMs running dry, ATM industry representatives said that it was the banks that were unable to meet the demand for cash. They said banks had not been able to meet their indent, the daily calculation of cash required, for the past four-five days.

After yellow Rs 200 notes, get ready for new chocolate brown Rs 10 notes

Still haven't gotten used to the new Rs 200 notes in bright yellow (or is it orange)? Soon, you will be paying your balance using chocolate coloured Rs 10 notes. According to reports, the Reserve Bank of India (RBI) is set to issue new Rs 10 notes that will be chocolate brown in colour.

The new Rs 10 note will be issued by the central bank under the Mahatma Gandhi series and it will sport the picture of the Konark Sun Temple, which is situated in Odisha, Moneycontrol reported on Thursday. Further, citing people familiar with the matter, the financial daily reported that around one billion pieces of the new note have already been printed by the RBI.

The last time the design of the old Rs 10 note was changed was in 2005, the report added. The new design, the financial daily said, was approved by the government just last week.

But why are we set for a newly-designed Rs 10 note? According to the financial daily, the move to re-design lower denomination notes is part of the government's plan to get rid of counterfeit currency in the country.

As reported in December last year, according to information provided by the Minister of State for Finance, P Radhakrishnan, as many as 169.6 million pieces of Rs 500 denomination note were printed till December 8. The minister also informed that the RBI printed 36.5 million pieces of Rs 2,000 notes. Similarly, 17.8 million pieces of Rs 200 notes had been printed by that time.
(Read more)

After note ban, will Modi govt now ban cheque books for its digital push?

After deciding to revoke the legal tender of Rs 500 and Rs 1,000 currency notes in November last year, the Narendra Modi -led central government might now be working on another disruptive step to boost digital transactions — banning the cheque book. A senior functionary of the Confederation of All India Traders (CAIT) on November 16 said the Centre might withdraw the bank cheque book facility in the "near future" to encourage digital transactions.

CAIT Secretary General Praveen Khandelwal said the government needed to encourage the use of debit and credit cards. "In all probability, the Centre may withdraw the cheque book facility in the near future to encourage digital transactions," he said.

Impact of cheque book facility withdrawal

Demonetisation was a big disruption for most Indians, right from poor labourers to big industrialists. Now, the withdrawal of the cheque book facility could have a massive impact as well. Most business transactions are conducted through cheques. According to experts, 95 per cent transactions currently take place via cash or cheques.

Since cash transactions have declined, transaction by cheque might have increased after demonetisation.

Use of cheque in India

Cheques are fairly popular in SME payments. By taking a PDC (post-dated cheque) against the delivery of goods, a supplier secures payments due in future from its customer. People pay by cheques while buying land and house, too.

Many landlords now take rent from tenants via cheque. Since November 8, 2016, digital payments like BHIM have grown. However, their sweet spot has been small-value payments (two to three figures). The retail and commercial payment usage strongly suggests that cheque is a very compelling method of payment for large-value payments (four figures and above).

Note ban effect: Currency printing cost more than doubles to Rs 7,965 crore

Note ban effect - The Reserve Bank of India (RBI) spent Rs 7,965 crore on printing currency notes between July 2016 and June 2017, compared to Rs 3,420 crore in 2015-16, an increase of 133%, according to RBI’s annual report 2016-17.

This was highest over the last 17 years, Bloomberg reported on August 30, 2017.

The rise in expenditure was attributed to newly designed notes of higher denominations and the need to replace demonetised currency, the RBI report said. Banknotes were often airlifted from the presses to RBI offices across the country to ensure currency was available after demonetisation, adding to the cost of distribution.

Prime Minister Narendra Modi on November 8, 2016 announced the withdrawal of Rs 500 and Rs 1,000 notes–which constituted 85% of cash in circulation–in a move to fight corruption, black money, money laundering, terrorism and financing of terrorists as well as counterfeit notes, a narrative that kept changing, as IndiaSpend reported on December 5, 2017.

Of Rs 15.44 lakh crore demonetised currency in circulation, about 99% or Rs 15.28 lakh crore came back to the central bank as on June 30, 2017, the annual report said.
READ MORE

Demonetisation hit RBI's seigniorage, increased printing cost: SBI Research

Demonetisation has caused a net loss to the Reserve Bank of India's (RBI's) seigniorage -- the profit accruing from currency issuances and liquidity operations -- besides increasing the cost of printing notes, says an SBI Research report.

On November 8 last year, the government had banned old Rs 500 and Rs 1,000 notes in an attempt to weed out black money in the country. The old notes were allowed to be deposited in banks, with unusual deposits coming under income tax scrutiny.

"The demonetisation exercise has resulted in net loss of seigniorage to the RBI," SBI's research report Ecowrap said.

"In the current case, there is a seigniorage loss, as the face value of Rs 15.28 lakh crore (15.28 trillion) of Rs 17.10 lakh crore (17.1 trillion) has been printed," it said.

The report further said that "the cost of printing notes and coins has increased during this year".

In its Annual Report for 2016-17, RBI has said that post demonetisation, it has spent Rs 7,965 crore on printing new Rs 500 and Rs 2,000 and other denomination notes, more than double the Rs 3,421 crore spent in the previous year.

Note ban: 1.8 mn accounts being probed for large deposits, says Jaitley

Authorities have detected 18 lakh cases after demonetisation where the income profiles of people do not match their account profile, the Lok Sabha was informed on Friday.

Preliminary information has been sought from such people and many have responded. Those who have not given details would be issued with notices as per procedure, Finance Minister Arun Jaitley said during Question Hour.

Responding to supplementaries, he said there was an extended footprint of digitisation in the banking sector. With digitisation, the risk of tampering of technology also increases.

But banks are also hiring experts to develop firewalls around their system to make it increasingly difficult to breach it, Jaitley said, adding that technology has to keep pace with crime.

He also said that risk assessment was a continuous process for banks who do it individually and collectively.

In his written response, Jaitley said as on March 31, 2016, 29 per cent of the savings accounts of public sector banks and regional rural banks sponsored by them were inoperative or lying dormant.

A variety of factors have a bearing on an account being inoperative. These may include factors like opening of a new account with change of residence or office, death of the account holder or the relative convenience of operating different accounts, he said.(READ MORE)

Another new note, this time for Rs 200, from RBI on its way?

Are you tired of receiving higher denominations of Rs 2,000 and Rs 500 notes? Or are you still grappling under the effects of demonetisation where Rs 100 notes are a rare sight at Automated teller machines (ATMs)? Worry no more —The Reserve Bank of India (RBI) has cleared a proposal to inject Rs 200 notes around June, 2017.

The development comes after anonymous sources revealed that the decision was taken at the RBI board meeting in March, Live Mint reported.

The move comes against the backdrop of government’s aim to rework the Indian monetary system. An RBI spokesperson declined to comment.

Even though the RBI lifted all cash withdrawal caps from ATM and banks on March 13, 2017, operators say there is a dearth of lower denomination banknotes.

The RBI board has 14 members, including Urjit Patel, four deputy governors, Economic Affairs Secretary Shaktikanta Das.

Narendra Modi government's surprise move on November 8 to scrap Rs 500 and Rs 1,000 notes has posed some temporary trouble for consumers in a cash-dominant economy like India, putting 86 per cent of the currency out of circulation. (READ MORE)

Reason to cheer: No more limits on cash withdrawals at ATMs

BREAKING NEWS - All limits on savings bank cash withdrawals post-demonetisation ended on Monday, as had been announced by the Reserve Bank of India (RBI) last month.

In a two-stage process, the weekly withdrawal limit per account had been raised to Rs 50,000, from Rs 24,000, with effect from February 20, and all limits on ATM withdrawals were slated to cease from March 13.

The announcement had been made by RBI Deputy Governor R. Gandhi following the fiscal's last monetary policy review announcement by the central bank in February, when it kept its key interest rate unchanged at 6.25 per cent, saying it awaited data on the full impact of the government's demonetisation drive.

On January 30, the RBI had ended all curbs on withdrawals from Current Accounts, Cash Credit Accounts and Overdraft Accounts.

The limits were placed following the November 8 demonetisation of Rs 1,000 and Rs 500 notes. The upper limit at ATMs was just Rs 2,500 initially and was later raised to Rs 4,500.

In January, the RBI had hiked the daily ATM withdrawal limit to Rs 10,000 and doubled the weekly Current Account withdrawal limit to Rs 1 lakh.

The upper limit for weekly withdrawal from bank accounts had been raised to Rs 24,000 from Rs 20,000 in November.

While lifting of ATM withdrawal limits represents coming full circle for these machines in respect of demonetisation, the return to normalcy in terms of cash available in them is still awaited, indicating the slow pace of remonetisation.(READ MORE)

Pay Rs 150 after 4 cash transactions in a month at HDFC Bank, ICICI, Axis

Breaking News - Banks including HDFC Bank, ICICI Bank and Axis Bank today began charging a minimum amount of Rs 150 per transaction for cash deposits and withdrawals beyond four free transactions in a month.

The charges would apply to savings as well as salary accounts effective from today, leading private sector player HDFC Bank said in a circular.

The bank would also cap the third party cash transactions at Rs 25,000 per day, while cash handling charges would be withdrawn effective today, the circular added.

The move was seen in some quarters as aimed at discouraging cash transactions and furthering the digital payment drive.

For the basic no-frills accounts, maximum four cash withdrawals would continue to remain free and there would be no fees for cash deposits.(READ MORE)

PM Modi's letter defending note ban gets delivered in every UP household

Election 2017- Prime Minister Narendra Modi has written a letter addressing voters in Uttar Pradesh saying that his government's surprise demonetisation measure was necessary to root out corruption and prevent terrorism, reported The Economic Times on Tuesday.

According to the report, over 1,600 motorcycle-borne activists have been tasked with the duty of delivering the prime minister's letter to 2,75,000 households every day.

The move comes at a time when the Bharatiya Janata Party (BJP) might not be fairing as well in Uttar Pradesh as the party had initially thought. As reported earlier, there is a noticeable defensiveness among BJP voters and supporters this time around regarding the note ban and every time the questions related to the issue crop up. Further, the BJP’s local offices, which in 2014 brimmed with people prematurely celebrating Narendra Modi’s victory before counting, have been muted. (Read more)

A young party official of the Rashtriya Swayamsevak Sangh provenance in Rampur, who had his nose to the grindstone when the Lok Sabha polls were underway, told Business Standard that he “lost interest” this time. “I have nothing to say to our voters when they pose uncomfortable questions on demonetisation. I am packing my bags and taking a vacation in my village,” he said. The official’s main worry was that demonetisation had begun to "chip away" at Prime Minister Modi’s image. "Modiji has invested much personal and political capital in it but people ask me, does he not understand our hardships? Why did he make us suffer?" he added. (Read More)

Note ban splits BJP's trader vote bank in western UP

UP elections 2017 - Manoj Kucchal, a hardware vendor in Bijnor’s commercial hub, Sadar Bazar, looked harassed as he summoned his chartered accountant for the morning session he has been holding since the taxman knocked on his doors.

The taxman started sending him alerts after vetting Kucchal’s bank accounts to check how much cash was put in it after November 8, the day Prime Minister Narendra Modi demonetised high-value currency notes.


“The I-T (income tax) department has served 10 messages on my mobile in the past 10 days. If I do not answer these within 10 days, I will have to pay a penalty of Rs 10,000 per notice. The thing that amuses me is the number of times I have used the figure 10,” said Kucchal, who heads the Bijnor district traders’ association.

At Saharanpur, 110 km away, Vivek Minocha, who helms the city’s traders’ forum, is feeling harassed. “The I-T guys are demanding proof for every rupee we put in (to a bank account). The PM himself said once not to probe deposits of up to Rs 2.5 lakh by housewives. The women in my joint family have made deposits. It seems the I-T sleuths will not heed his advice. What do I do?” asked Minocha.(Read More)

Full text: RBI keep repo rate unchanged at 6.25%

Sixth Bi-monthly Monetary Policy Statement, 2016-17 Resolution of the Monetary Policy Committee (MPC), Reserve Bank of India 

On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) decided to:

1)  keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.25 per cent.
Consequently, the reverse repo rate under the LAF remains unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.

The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band of +/- 2 per cent, while supporting growth. The main considerations underlying the decision are set out in the statement below.

Assessment 

2. Global growth is projected to pick up modestly in 2017, after slowing down in the year gone by. Advanced economies (AEs) are expected to build upon the slow gathering of momentum that started in the second half of 2016, led by the US and Japan. However, uncertainty surrounds the direction of US macroeconomic policies with potential global spillovers. Growth prospects for emerging market economies (EMEs) are also expected to improve moderately, with recessionary conditions ebbing in Russia and Brazil, and China stabilising on policy stimulus. Inflation is edging up on the back of rising energy prices and a mild firming up of demand. However, global trade remains subdued due to an increasing tendency towards protectionist policies and heightened political tensions. Furthermore, financial conditions are likely to tighten as central banks in AEs normalise exceptional accommodation in monetary policy.

Outlook 

11. In the fifth bi-monthly statement of December, headline inflation was projected at 5 per cent in Q4 of 2016-17 with risks lower than before but still tilted to the upside. The decline in headline CPI inflation in November and December has been larger than expected, but almost exclusively on the back of deflation in vegetables and pulses. While the seasonal ebb in the prices of vegetables that usually occurs with the onset of winter as well as some demand compression may have contributed to this outcome, anecdotal evidence points to some distress sales of perishables having accentuated the decline in vegetable prices, with spillovers into January as well. Looking beyond, prices of pulses are likely to remain soft with comfortable supply conditions, while vegetable prices may potentially rebound as the effects of demonetisation wear off. 

Read Full Article On Business Standard

New notes worth Rs 9.2 lakh cr issued so far: Urjit Patel

Latest News - The Reserve Bank of India has injected Rs 9.2 lakh cr ($135.21 billion) worth of new currency notes into the banking system to help replace the notes banned in November, a parliamentary source quoted central bank governor Urjit Patel as saying on Wednesday.

Patel met a parliamentary panel on finance on Wednesday to answer questions about the country's recent move to abolish 500 and 1,000 rupees notes, or 86% of the currency then in circulation, in a bid to unearth billions of dollars of unaccounted money.

About Rs 15.4 lakh crore worth 500 and 1,000 rupees notes were removed from circulation after the Nov. 8 announcement from the government.

Urjit Patel is learnt to have told the parliamentary panel on demonetisation that discussions between the central bank and the government on the process began early last year.

Congress members of the committee asked questions like whose decision was it to withdraw high currency notes and also about autonomy of RBI, sources said.

BJP members of the panel, headed by Congress leader Veerappa Moily, however, chose not to raise much questions during the meeting, they added.

The questions put up by the panel ranged from the total amount of money that came back during the demonetisation period to the total amount of new bills of Rs 500 and Rs 2,000 that were printed and sent to the banks.(Read More)

RBI raises ATM withdrawal limit to Rs 10,000 a day

Breaking news - Further relaxing the rules for cash withdrawal from automated teller machines (ATMs), the Reserve Bank on Monday raised the cap from Rs 4,500 a day to Rs 10,000 for each card, but within the existing weekly limit of Rs 24,000 per week, with immediate effect.

Besides, current account holders can now withdraw up to Rs 1 lakh per week. Earlier, they were allowed to withdraw only up to Rs 50,000 in cash in a week. This facility has been extended to overdraft and cash credit accounts as well.  

Already the cash availability has improved vastly in cash vending machines as more new notes are getting released in the system, but the weekly limit persists. The enhanced withdrawal limit, will help banks to bring down the transaction cost, which has now been waived off by the central bank till March.

The RBI had imposed these limits in November after the government announced a ban on all high-value currency notes, and said it would replace them with new notes.

The withdrawal limits are unlikely to be removed completely until the RBI has supplied the economy with sufficient amount of new notes, analysts said.(Read More)

After note ban, banks flush with cash but India Inc in no shape to borrow

“Demonetisation has made banks flush with funds, and they will lend it to productive sectors.” — Power Minister Piyush Goyal, November 26, 2016.

It won’t be quite as easy as Goyal said.

Rising non-performing assets (NPAs) and sluggish economic growth sparked a 60% decline in corporate borrowing over the last six years, according to an IndiaSpend analysis of Reserve Bank of India (RBI) data, inhibiting the anticipated lending bonanza to companies from banks after demonetisation.

Now, after the government scrapped 86% of India’s bank notes, by value, there are growing indicators of a further slowing.

Automobile companies are witnessing the sharpest fall in deliveries to dealers in 16 years, the Times of India reported, home sales have hit a six-year low, NDTV Profit reported, and bank credit to infrastructure companies declined steadily over the first eight months of 2016-17 and contracted 6.7 per cent in November, the Indian Express reported, quoting RBI data released on January 10, 2017.

So, the Rs 12.44 lakh crore that has now returned to the banking system may be difficult to lend to the corporate sector.

“Deposits can be deployed only if interest rates are cut. Without reducing interest rates, demand won’t rise,” said Nilanjan Ghosh, economist of the Observer Research Foundation, a think tank. “The assumption is that demonetisation has led to higher deposits, resulting in larger cash reserves, allowing banks to advance loans and earn interest. This, in turn, will impact profits, strengthening the core capital of banks.”(Read More)

Even Donald Trump building isn't immune to India's real estate woes

Latest Business News - After trying for four months to sell his apartment in a western suburb of Mumbai, Meher Verma decided to cut the price by 10 per cent. With property demand plummeting in the wake of November’s sudden ban on high-denomination notes, he’s not sure the reduction will do the trick.

“I was hoping to sell my house soon,” said Verma, who put his two-bedroom property in Andheri on the market for $400,000 in September. “Now it looks like I might have to cut my price or wait much longer for the market to improve.”

Real estate has long been a place where Indians have parked cash, often using money on which taxes haven’t been paid. Now, with the crackdown on so-called black money and the underground economy, real estate is taking a hit. The rate of home sales has fallen by about half since the government acted in early November, according to an estimate from Khushru Jijina, managing director of Piramal Fund Management. Home prices may decline 20 per cent and land prices could plummet as much as 25 per cent, according to analysts’ projections. 

“Those who were looking to buy property as an investment vanished overnight from the market after the cash ban,” said Aubrey Carvallo, a Mumbai broker who has never seen demand in Mumbai so low in his two decades of working in the industry. He’s been unsuccessfully seeking buyers for eight apartments with prices starting at Rs 1.5 crore. “They are thinking of moving to stock markets and other financial assets, as real estate prices are set to correct in the coming years with the government crackdown on unaccounted money.”(Read More)

Post demonetisation: UP elections will be the real test for Modi and BJP

Breaking news - In the normal course, politics is a careful, cautious and calibrated profession. When in the government, politicians tend to turn even more conservative and risk-averse. Given this context, the demonetisation announcement by Prime Minister Narendra Modi does not fit the conventional mould. Why did he go ahead with it? What were his motivations?

As even his opponents have been forced to concede today, the economy had been repaired significantly in the past two years. The fiscal health of the government was an ocean apart from the profligacy of the UPA years. Foreign investment had picked up. Consumption was slowly beginning to regain lost ground. Domestic private sector investment and job creation remained a problem, but there was hope that the passage and implementation of the Goods and Services Tax (GST) would indicate a more broad-based recovery by 2019, when Modi led the BJP into its re-election campaign.

Modi was in as sweet a spot as is possible for an Indian prime minister in mid-term. Why then did he plunge into this massive disruption, one that was unprecedented in a healthy as opposed to a collapsing or inflation-assaulted economy and the consequences of which could be guessed and surmised but never accurately forecasted? The answer lies in a single word: belief.(Read More)

Note ban: PM Modi silent on gains, hints pain may last little longer

Prime Minister Narendra Modi addressed a well-attended public rally in Kanpur, the precursor to what many expect to be his game changing rally in Lucknow on January 2. The Lucknow public rally will come at the end of his promised 50 days of “pain” of note ban.

He had earlier promised that days of pain would lead to “gain” for the public. However, the PM on Monday seemed to be suggesting that the pain might last a little bit longer, and he didn’t for once utter the word “gain” in nearly an hour long speech, and exhorted people to be willing to suffer inconveniences for a few more days for a brighter future of the country.
The PM railed against the Opposition for not letting Parliament function, for obstructing his fight against black money and corruption and for lying and trying to mislead people. Modi said India, post-Demonetisation, was divided into two halves – a small minority of politicians trying to protect black money, corruption and dishonesty, and the other half comprising the hardworking and honest poor and middle classes of the country who are fighting this battle to reclaim their right.(Read More)