AFTER EFFECTS OF DEMONETIZATION OF CURRENCY: The Indian Economy as a whole has reacted sharply to the recent demonetization decision of Government to withdraw Rs.1,000 and 500 currency notes from the market. Some of the points which are of much importance are being emphasised here:

A) WINDFALL GAIN FOR RBI: Demonetization will bring windfall gains to Reserve Bank of India (RBI) as it will reduce RBI’s liabilities, to the extent that the old notes do not come back into the system. RBI could gain as much as Rs.6 lakh crores, assuming that even less than half of the notes valued at Rs.15 lakh crores do not get re-deposited in the banking system.

B) RBI WAIVES CHARGES ON ATM TRANSACTIONS: The Reserve Bank of India has instructed all banks to waive ATM transaction charges (both financial and non-financial charges). This waiver will be effective till 30th December, 2016,subject to further review.

C) REDUCTION IN INTEREST RATES FOR BOTH DEPOSITS AND LOANS: Because of currency demonetization all the banks will be flush with huge liquidity and this will force them to reduce interest rates for both deposits and advances (loans). This has been already implemented by some banks, as SBI has brought down its bulk deposit rate to 6.95%, Axis Bank has reduced its Marginal cost of lending rate ( MCLR) by 20 basis points.

D) BANK LOAN – DISBURSAL AND REPAYMENTS TO TAKE A HIT: Demonetization will hit the business of banks in the third quarter of the fiscal. The impact is due to both the internal and external factors. Internally, banks are unable to start their normal business operations such as processing of loans.They are unable to keep a watch on their recovery aspects as well. Externally, due to the slowdown in the business many borrowers will not be in a position to repay their loans in time.

E) PENALTY LIKELY ON UNEXPLAINED HIGH DEPOSITS EVEN BEFORE FILING IT RETURNS: The I-T Department may slap a hefty 200% penalty on unexplained high cash deposits in banks even before annual income tax returns are filed so as to prevent black money being converted to white. It is also collecting data on spurt in deposits in zero-balance Jan-Dhan accounts and will slap 200% penalty on unexplained high value cash deposits.

F) YOU CAN WITHDRAW MONEY NOW AT PETROL PUMPS:  With as many  as 50% ATMs’ across the country not operationalized yet, the government has permitted the state run petrol stations to disburse cash by swiping your debit card. This is done to normalise the panic situation in the country. Presently around 2,500 Petrol stations where State Bank of India  swipe  machines are used are enabled with this facility and within two-three days around 20,000 more petrol stations will be enabled where swipe machines of HDFC Bank, ICICI bank and  Citibank are being used. One can withdraw Rs.2,000/- per day at these petrol stations by swiping his/her debit card.

G) SHORT TERM DEFLATIONARY TREND IN THE ECONOMY: Initially the economy as a whole will suffer adversely as most of the trade/industry will be slowed down. This is because of the diminishing trend in the currency circulation, there by lack of purchasing power with the general public. But this deflationary trend is temporary and will only last for a few months. Once the money circulation becomes normal the trade and industry will pick up.



1. GOVERNMENT WITHDRAWS Rs 500, Rs 1,000 NOTES TO FIGHT BLACK MONEY AND FAKE CURRENCY MENACE: In an Extraordinary and Historical move, Honourable Prime Minister Shri Narendra Modi withdraws the circulation of Rs 500/- and Rs 1,000/- currency notes from midnight of 8th November 2016. We have already covered the details in our separate BLOG- IMPACT OF DEMONETIZATION OF CURRENCYIN INDIA.

2. MULTIPLE TAX SLAB & CESS TO COMPLICATE GST: While the Indian trade, commerce and Industry is getting ready for the “GST”( Goods and Service Tax) regime, Industry experts say that multiple tax slabs coupled with the cess will complicate the GST. The GST council has almost finalised the four-tiered rate structure of GST—5%, 12%, 18% and 28%. And cess on demerit items like tobacco, pan masala, luxury cars, aerated drinks etc. The 28% slab will be mostly on majority of consumer durable sector. The cess is to compensate states for a possible revenue loss.

3. SBI 2nd QUARTER PROFIT PLUNGES 99.6% ON HIGHER BAD LOAN PROVISIONING: State Bank of India recorded 6% dip in consolidated net profit at 20.70 crore for September 2016 quarter  on account of 3-fold jump in bad loan provisioning. Its profit was Rs 4991.70 crore during the same quarter of the last financial year.

4. NEW NOTES WILL NOT HAVE “TRACKING CHIPS”: With introduction of new Rs 2,000 and Rs 500 notes, reports were abuzz with rumours that the new notes will have “nano GPS tracking chips” embedded in them which will enable tracking. Now Reserve Bank of Indiahas denied the same saying there is no such thing in the notes and is just a rumour and there is no reality in it.

5. NEW Rs 1,000 NOTES WITH EXTRA SECURITY FEATURES IN A FEW MONTHS: Government will re-introduce Rs 1,000 bank notes in a few months along with new series of lower denomination notes with enhanced security features.

6. RBI ASKS BANKS TO CHANGE DEBIT CARDS WITH MAGNETIC STRIPS: Considering the on-going chaos over debit card breach, the Reserve Bank of India has asked all the banks to change their magnetic strip based debit cards with “chip based” cards. Banking experts claim that chip-based cards are comparatively more secure than magnetic strip cards. The chips are more secure and are difficult to hack. However these chip-based cards are in the premium category and involve more cost. But looking at the security aspects, many banks will start issuing chip-based cards soon to all its customers.

7. INDIA’S FIRST BANKING ROBOT-“LAKSHMI”MAKES ITS DEBUT IN TAMILNADU: Endearing, interactive and superfast with data, india’s first banking robot LAKSHMI made her debut in Chennai, launched by City Union Bank. ROBOT LAKSHMI will be the first onsite bank helper.


GOVERNMENT WITHDRAWS Rs 500, Rs 1000 NOTES TO FIGHT BLACK MONEY AND FAKE CURRENCY MENACE: In an Extraordinary and Historical move, Honourable Prime Minister Shri  Narendra Modi withdraws the circulation of Rs.500/- and Rs.1,000/- currency notes from midnight of 8th November 2016. The driving force behind the historical decision was to eradicate black money and fake currency menace.


 A) BLACK MONEY HOARDERS: A recent study had pegged India’s black market economy at over Rs.30 lakh crore, which is about 20% of total GDP. By banning the Rs.500/- and 1000/- currency, black money hoarders will have a tough time. They either have to route this money through bank which will attract heavy penalty or they have to burn the stashed cash.

B) FAKE NOTE CIRCULATION: India is facing the fake money menace and fake currency infiltration in the country by the terrorists. Hence by withdrawing the circulation of this currency and introducing new currency is a big blow to these groups. This is nothing less than a kind of“Super Surgical Strike” on these groups.

C) IMPACT ON RURAL ECONOMY: A strong criticism of the scheme that came across is the possible negative impact on rural economy. India has more than 6.8 lakh villages and most of these village population does not have any banking facility.  This is likely to come across as a huge shock for such sections of our population.  It will be long before the entire rural India moves towards cashless economy.

D) DOMESTIC/HOUSEHOLD SECTOR: Domestic and household sector or rather the middle income group is going to suffer a lot because of this currency ban as they would face lot of inconvenience. But this is just for a few days and once the new currency is issued and lower denomination currency circulation comes to normal there will be relief.

E) BANK DEPOSITS WILL SPIKE: Banks are expected to witness a surge in deposits. The banks’low cost deposit will be on the rise immediately. Banks will see huge rise in their term deposits as well and banks will have more liquidity. This will  result in fall of interest rates.

F) IMPACT ON JEWELLARY AND REAL ESTATE BUSINESS: The Decision of the government is widely welcomed by the jewellery industry all over the country. The general opinion is that Gold will be in vast demand as people will have more faith in gold than currency. It will indeed create destabilisation for a while, but overall it is expected to benefit the industry. In the real estate sector the unorganised and secondary (resale) property market would be adversely impacted. According to this sector, the Housing prices would witness a drastic downfall, which will in turn help to revive the low demand in this sluggish market.

G) IMPACT ON CAPITAL MARKET: With initial day of slump in the market, the market is seeing an upward trend from the next day. The capital market will be bullish in the near future as investors expect the Bank Deposit rates to fall, and thereby they will start investing in equities.

H) TILT TOWARDS CASHLESS ECONOMY: Due to the currency ban the government has fixed new limits on the ATM withdrawals at Rs.2,000/- per day, withdrawals from bank accounts to Rs.10,000/- per day. Perhaps the government is tryingthis on a pilot basis and if the situation stabilises then it will drive the card payments across the country, there by paving the way for a “Cashless Economy—card transactions replacing cash transactions.


RBI WANTS 10% OF BANK ATMs TO DISPENSE ONLY Rs 100/- NOTES: Reserve Bank of India has said that it will conduct a pilot project wherein 10% of ATMs in the country will exclusively be made to dispense only Rs 100/- banknotes. This is undertaken to address the genuine requirements of members of the public.

BANK TO REPORT FRAUDS OF Rs 1 CRORE AND ABOVE TO CVC:With several High-ticket alleged frauds coming to the fore, Central Vigilance Commission ( CVC) has now made it mandatory for public sector banks to report to it, all such matters involving funds over Rs one crore. For this purpose CVC has hired four General Manager ranked officers from banks as advisors, who will recommend whether CBI probe can be further initiated or not.

AXIS BANK ENABLES SUBMISSION OF YOUR 15 G/H THROUGH MOBILE: Axis bank has launched “Insta Services”to enable electronic submission of Form 15 G/H through its mobile application. With this, their customers need not visit the branches to submit these forms and can submit the forms at ease from their homes. Form 15 G/H are self-declaration forms required to be furnished by the assesse to the bank for “nil” deduction of TDS (Tax Deduction at Source) on interest income. Form 15G is for everyone and Form 15H is for senior citizen.

E&Y (ERNST & YOUNG) SAYS RURAL INDIA CAN GET FINANCIAL COVER VIA MOBILE SERVICES : London based professional service firm E&Y says that there is a large untapped Indian rural population waiting to be covered under the financial net and this can be made possible through mobile based services. Initiatives such as Jan Dhan Yozana that led to the opening of 125 million new bank accounts indicate the appetite of financial services in the country. According to its survey, there is still a large (nearly 47%) untapped population to be covered under the financial net.

57 BORROWERS OWE BANKS WHOPPING Rs 85,000 CRORES: Only 57 borrowers have defaulted on banks worth whopping Rs 85,000 crores. The Supreme Court (SC) said this after perusing a report submitted by RBI about persons who have taken loan worth Rs 500 crores and above and defaulted. The SC asked the central Bank as to why their names should not be made public. The SC bench also remarked that if the bar was lowered below 500/- crores, then the amount would cross over Rs one lakh crore.

WHAT HAPPENS TO YOUR MONEY WHEN YOU LOSE MONEY AFTER A DATA BREACH: Indian Banks carried out the country’s biggest card replacement move after a massive data breach that had its source in China. While this has been a proactive measure to protect the interest of the customer, there are a few things one must be aware. If a customer loses money due to the data breach then according to a draft issued by RBI, the concerned bank is responsible for the same and the bank should credit the amount involved in the unauthorised electronic transaction to the customer’s account within 10 working days.