One Year Of Note Ban In A Nutshell

It’s one year since demonetization. Prime Minister Narendra Modi scrapped Rs 500 and Rs 1000 notes on this very day, last year, in a day you will never forget. More than 85% of currency by value was scrapped in seconds. The aim of this move was to destroy black money which fuels corruption and terrorism in India. Demonetization dealt a severe blow to fake currency. On the very next day after demonetization, banks and ATM’s were closed.

This move sent shockwaves across the country, as initially citizens were confused, as they thought their old Rs 500 and Rs 1000 notes were worthless. The Prime Minister assured the people of India that their old Rs 500 and Rs 1000 notes had not lost value. All they had to do was deposit these notes in their bank accounts before December 31^st 2016. Old notes could also be exchanged up to certain limits. The maximum limit was Rs 4,000. Any amount above this was transferred to your bank account through electronic fund transfer.

Banks placed withdrawal limits on the maximum amount you could withdraw from your bank account. You could withdraw a maximum of Rs 10,000 a day or Rs 20,000 a week. You could still use old 500 and 1000 notes at Government hospitals, Milk booths, Petrol and Diesel stations of PSU Oil Companies and railway/airline/bus ticket booking counters, only for a period of 72 hours. Those citizens who did not have bank accounts could open PMJDY bank accounts after meeting KYC Norms and deposit these old notes in them.

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One Year Of Note Ban In A Nutshell

Demonetization was not without problems

Many citizens had a tough time after demonetization. Citizens who did not have bank accounts had to open them in a hurry. Bank staff had a tough time servicing customers as they lined up at banks. Some queues were a Kilometer long, especially in Mumbai.   

India is a country where more than 95% of transactions were in cash. With ATM’s only dispersing Rs 2000 notes and with cash withdrawal limits placed on bank accounts, there was a shortage of cash in the economy. Citizens with low income were the most impacted, as payments were delayed. ATMs had to be recalibrated to handle the new Rs 2000 notes and this would take time.

Citizens were willing to bear this burden. The reason….Black money would be destroyed and this had several benefits.

SEE ALSO: Why demonetization is a success?

Why citizens liked demonetization?

• Black money was often hidden in real estate, pumping up property prices in most cities. With the Government chasing black money and tax evasion becoming difficult, property prices were expected to fall in major cities.
•  Black money is often dumped in gold and gold jewelry and prices of gold would come down as citizens with black money would find it difficult to hide in gold.
• After demonetization banks were flush with cash as citizens deposited their old notes in SB accounts and Current accounts. Banks had a lot of money to lend and would cut interest rates on loans, especially home loans. With property prices falling and low home loan rates, the common man would be able to buy his dream home.
• It was believed that Rs 3-4 Lakh crores hidden in black money would not come back into the system. This would reduce RBI’s liability and more notes could be printed. The Government would use this money to improve infrastructure and also for the development of the economically backward in India.
• Tax evasion would become difficult and the Government would earn more revenue to spend on development activities.

Growth of cashless in India

There is no denying that demonetization accelerated the push towards cashless. Rural India is full of illiterate citizens, many of them unaware and apprehensive to adopt digital payments. These citizens would never experience the ease, convenience and safety of using digital payments. This would hamper the economical progress of these citizens and by default, the Nation.

Take a look at these figures:

• In FY 2016-17, there were a total of 865.9 Crore digital transactions across all banking platforms compared to just 254.5 Crore digital transactions in FY 2013-14. Yes...It's a tripling.
• There were 25.51 Crore PMJDY accounts on November 9^th 2016. Today, there are about 30.52 Crore accounts.
• There has been a 55% rise in digital transactions in a year. Mobile banking has jumped 122%.
• The BHIM App was launched in December 2016 to promote cashless payments. In just 7 months, the BHIM app based on the UPI interface processed over 54 Lakh transactions per month.

SEE ALSO: How UPI can make India a cashless economy?

The Government is observing November 8^th 2016 as anti-black money day. The opposition is calling it a Black Day. Prime Minister Narendra Modi has thanked 125 crore Indians on this day. Be Wise, Get Rich.