1. DEMONETIZATION IMPACT ON BANKS’ ASSET QUALITY WILL SHOW IN Q4: The asset quality problems for banks and finance institutions are rising as small customers are finding it very difficult with the adverse effect of demonetization on their business. But since RBI has given an additional 60 days’ time for borrowers to repay their dues, the banks have time to classify these assets as non-performing. Added to this, because of the demonetization work pressure, banks are unable to concentrate on recovery which will show its impact in the fourth quarter.

2. ONLINE LENDING FIRMS SEE HIGHER GROWTH: As Indian economy is taking a formalshift to cashless economy, lending companies who are engaged in online lending are seeing a huge potential to grow. Some online companies are rolling out plans for lending to restaurants and small traders against their sale through point-of- sale machines. Some of the online companies like Capital Float and LendingKart may double their business figures.

3. LINK FINANCIAL DATA OF CORPORATES TO DETERMINE CREDITWORTHINESS, SAYS CII: Confederation of Indian Industry (CII) has said that linking financial data and consolidating the existing data of small and medium enterprises and corporates can provide banks with the necessary information to assess creditworthiness of borrowers. It said it is possible to thread the said data accesses together for a well-connected digital infrastructure so as to enable banks to lend to credible borrowers and that too at a tailored interest rate.

4. PAY WITH YOUR AADHAAR CARD SOON: No card, No smartphone, No point-of- sale machine but if you have Aadhaar card and if the same is linked to your bank account then very soon you also can make payment. The use of Aadhaar-enabled payment system and opening up of Aadhaar database is on the verge of making it a reality. IDFC Bank and SBI have already introduced biometric readers at merchant outlets. There are 109 crore people enrolled with Aadhaar and hence this mode could be the most preferred mode of payment in future.

5. LOAN REPAYMENT WINDOW EXTENDED TO 90 DAYS BY RBI: In an effort to bring further relief to the people hit by demonetisation, the Reserve Bank of India gave borrowers another 30 days over and above 60 days for repayment of housing, car, farm and other loans up to Rs.1 crore.

6. CABINET MAY PASS AN ORDINANCE ON OLD NOTES: The government is all set to pass an ordinance to settle all issues regarding demonetization, extinguishing of the Reserve Bank of India’s liability in respect of the cancelled currency. The ordinance is likely to provide for a limited window to return cancelled currency in special cases only at RBI counters till March 31 st 2017. But this will be enabled with stiff conditions and only for people who can give valid reasons for not being able to deposit the cancelled currency before 30 th December 2016. An Ordinance for imposing heavy penalty has already been announced for possession of more than 10 notes of banned currency after 31/03/2017.

7. RBI WARNS BANKS ABOUT THE BENEFIT TO NBFCs FROM THE STRESS IN BANKING SECTOR : RBI is proposing to go ahead with a new bunch of Banks, such as Custodian and Wholesale Banks. Also it asked existing banks to rework their strategies, as Non Banking Finance Companies(NBFCs) are benefiting from the stress in banking sector.



1. BILLIONAIRE PREM WATSA BUYS STAKE IN CATHOLIC SYRIAN BANK: Canadian billionaire Mr PremWatsa’s Fairfax Financial Holdings has bought 51% stake in Kerala based private sector bank Catholic Syrian Bank Ltd in an unprecedented deal. This is a far reaching development for the banks who are desperately looking for capital to meet Basel III norms.

2. CASH DELIVERY- RBI CUTS PROCESS TIME: The Reserve Bank of India has decided to ease the process related to transfer of currency notes to banks by start of the day itself. At present it is nearly by the afternoon that the transfer of currency to banks is affected. Following the criticism of mismanagement, the RBI has decided to transfer currency by 9 am every day. This may ease the pressure faced by bankers.

3. BANK CREDIT PLUNGES BY 61,000 CRORE IN POST DEMONETIZATION PHASE: Because of the demonetization after effects, the bank credit has shrunk by a vast margin of Rs 61,000 crore. Percentage wise it amounts to 0.8% . But at the same time the banks have been benefitted as many borrowers, including some default accounts have paid back.

4. RAIDS BY I-T DEPT AT BRANCHES IMPACTING STAFF MORALE: Added to the stress levels due to the long hours of working since demonetization, fear of raids by I-T Dept has added to stress for banking staff. Respective bank managements are taking serious steps to keep the morale up. These steps include reaching out to the bank employees manning the front desks and cash, and creating Whartsapp groups to spread awareness about unscrupulousoperators and point out the risks involved.

5. RBI’s SMALL STEP TOWARDS e-KYC IS A GIANT LEAP TOWARDS DIGITISING FINANCE: The Reserve Bank of India has now allowed the opening of deposit and borrower accounts through OTP e-KYC. This small step by RBI is a giant step towards digitising banking in India. It will help the Financial Inclusion drive in a big way as it will bring in potentially millions of unbanked Indians under ambit of formal banking. The traditional KYC process by way of submitting certain documents is more time consuming and expensive. However, e-KYC  through  OTP is instant and happens in real time which will be paperless.

6. SOON IT WILL BE NO CHEQUES WITHOUT AADHAAR DETAILS: Banks may make it mandatory for customers to mention the recipient’s Aadhaar details while carrying out cheque transactions. This move resonates with the Central governments’ plan to link all bank transactions with Aadhaar card. Since Aadhaar card stores demographic and biometric informationof the card holder, Aadhaar linked Unified Payment Interface (UPI) will enable an individual to carry transactions using a single platform.

7. REASONS FOR CASH CRUNCH IN THE MARKET: Even after 38 days  of demonetization, the cash crunch doesn’t seem to be easing out. Hoarding of bulk new currency by some by some influential people across the country may be one of the reasons. However, hoarding may not be the only reason for the cash crunch. The other reason is that two of the government mints responsible for printing currency notes do not seem to be capable of printing so much money on short notice. But as per the latest reports the condition will improve in a few days.


1. RBI LIFTS INCREMENTAL CRR BURDEN ON BANKS: The Reserve Bank of India (RBI) has announced that the incremental 100% Cash Reserve Ratio ( CRR) requirement imposed on banks on November 26th will be withdrawn, effective from 10th December 2016. This additional CRR was for the deposits received between September 16th and November 11th. This was over and above the 4% CRR that banks already maintain with RBI. The additional CRR had been put in place to absorb excess liquidity which the banks have received by way of demonetization.

2. COMMON “QR” CODE SOON FOR PAYMENTS: As a part of multi-pronged push towards cashless economy, the government has asked RuPay, MasterCard and Visa to have a common “Quick Response” (QR) code based payment solution which will help merchants across India to accept payments without a card or swipe machine. This will be in line with the mode used by PAYTM now. A merchant will display his QR code, which the buyer scans through his smartphone app and can make payment using any of the three networks- RuPay, MasterCard or Visa.

3. PAYTM TO START PAYMENT BANK SOON: Paytm has got an in-principle approval from RBI for launching a payments bank. For this Paytm is transferring its wallet business into a newly created entity which is mandatory step to fulfil the rules laid by RBI. The wallet business is being transferred to the newly incorporated Paytm Payments Bank Ltd (PPBL). The transfer will be complete once the payment bank license is obtained.

4. AMAZON STARTS A NEW LAUNCHPAD PLATFORM TO HELP INDIAN START-UPS: Amazon.in, the Indian arm of Amazon.com has launched Amazon Launchpad in India to help Indian Start-ups to gain access to global markets. Amazon will lend its delivery and advertisement services to these start-ups and features their products on a dedicated store under the programme. Amazon charges Rs 5,000/- per merchant per month for the said services.

5. BAD LOANS CAUSE COLLATERAL DAMAGE AMID CASH CRUNCH: Banks are so busy to cope with cash crunch caused by demonetization that the critical task of following and going after bad loans has lost its track in banks. Not only that, bankers are worried that due to the demonetization there is a practical slump in asset value which means that the collateral value is depreciating making things worse.

6. EXCISE DUTY EXEMPTION FOR POS DEVICES: In yet another move to push the Indian economy towards digital economy, the government has provided excise duty exemption on point-of-sale (POS) devices manufactured in India. The excise duty exemption is also extended to all raw materials used for manufacture of POS machines. However, this exemption will be available only till 31st march 2017.

7. GOVERNMENT UNVEILS SPECIAL BONDS TO FREEZE DEMONETIZATION FUNDS: The government has created provisions to issue special bonds worth Rs 6.00 lakh crore to absorb the temporary flow of surplus funds with banks created due to demonetization. These bonds are called Market Stabilisation Scheme Bonds (MSS) and RBI will sell these bonds to banks on behalf of the government. Money raised by these bonds cannot be used by the government and does not add to fiscal deficit.



1. PRACTICAL (POSITIVE) ASPECTS OF DEMONETIZATION: We are herewith highlighting some of the true facts which have a positive effect on the economy as a whole due to demonetization. Though this may sounda bit crude but these are the real fact

A. TRADERS/BUSINESSMEN GOTTHEIR LONG OVERDUES BACK: Many a businessmen who had lost long lost hopes of recovering their long overdue amount were in for a surprise as many of them have received back their dues in the form of old currency notes.

B.MANY A TRADERS COULD SELL THEIR OLD STOCK OF PRODUCTS: Traders who were hoarding their old stock of products could dispose them in exchange of old currency notes.

C.WORKERS GOT UP TO 6 MONTHS ADVANCE SALARY: The rich class who were hoarding black money, in a hurry to dispose the old notes have given hefty advance salaries ( up to 6 months also in some cases) to their staff like factory and office workers, servants, drivers etc. This is a big boost to these poor people.

D.POOR JAN DHAN ACCOUNT HOLDERS HAVE BEEN BENEFITTED: The rich class who were hoarding black money have found a new way to deposit their ill wealth by convincing the poor to deposit their money into their respective Jan Dhan accounts, ofcourse may be for a monetary benefit. And this is the main reason why these JanDhan accounts are flush with funds now as reported by the media.

E. MUNCIPAL CORPORATIONS RECEIVED THEIR LONG PENDING DUES OF PROPERY TAX: Respective Municipal Corporations of various cities have been benefitted as they have received the long outstanding dues of property tax. People who were reluctant or deliberately not remitting their property tax to the corporationshave remitted all the arrears by making payment in old currency notes.

 F. LOCAL POLITICIANS HAVE DISBURSED INTEREST FREE LOANS :Local politicians in some of the rural areas across the country have disbursed interest free loans to the local people in the form of old currency notes, as reported by media.

 G. BENEFITS TO LOW PROFILE YOUTH, IN EXCHANGE OF OLD CURRENCY :Many affluent businessman have utilised the services of low profile youth for exchanging old currency in various banks, of course for a monetary benefit to these youths.

2. GOVERNEMENT WILL LEVY 50% TAX ON UNEXPLAINED DEPOSITS: Unaccounted deposits made in old currencies up to 30th December 2016 will attract 50% income tax and a lock-in period of 4 years –IF IT IS DECLARED TO THE INCOME TAX DEPARTMENT. After levying tax at 50%, the half of remaining deposit (25% of the original deposit), will not be allowed to be withdrawn for four  years& will not fetch any interest. But undisclosed money detected in bank accounts could attract a penalty up to 90% and a longer lock-in period.

3. DEMONETIZATION COULD HIT THE BANKS’ PROFITS FOR THE THIRD QUARTER: Due to the factors linked to the demonetization of high currency notes, the banks’ profits for the third quarter of this fiscal could take a serious hit. The reasons include the requirement that banks need to park 100% of their incremental deposits, under CRR temporarily with the RBI at zero% interest rate, slowdown in loan growth due to resources getting diverted for the on-going demonetization exercise, and operational expenses incurred in recalibrating the ATMs.