We’re a little slow today, but here’s the lowdown on what the government has announced regarding demonetization since last evening:
1. No over the counter exchange of old Rs 500 and Rs 1000 notes after midnight yesterday. Oddly enough, despite the queues, the government notice says that “It has been observed that over the counter exchange of the old currency notes of Rs 500 and Rs 1000 denomination has shown a declining trend.” The government sees this as a means of getting people to deposit their old Rs 500 and Rs 1000 notes in their bank accounts, and is hoping that “This will encourage people who are still unbanked, to open new bank accounts.” The issue with this is that those who don’t have a bank account will have to get one opened (and it’s not a smooth, quick process), then deposit their money, and then withdraw it. What will they do till then?
This is contrary to what the Prime Minister Narendra Modi had said when demonetization was first announced:
8. From 10th November till 24th November the limit for such exchange will be four thousand rupees. From 25th November till 30th December, the limit will be increased.
Additionally, the notes can still be exchanged at RBI counters:
The Reserve Bank of India advises members of public that exchange of banknotes in Rs 500 and Rs 1000 denominations, whose legal tender status has been withdrawn, will continue to be available at the counters of the Reserve Bank upto the current limits per person as hitherto. (However such exchange facility is no longer available at other banks’ counters).
The RBI has branches in 26 state capitals. This, though, is remarkably insensitive:
Idea was to curb misuse of cash exchange. Common man should have exchanged notes by now: RBI on currency exchange
— IndiaTodayFLASH (@IndiaTodayFLASH) November 25, 2016
2. All exemptions are being continued till the end of 15th of December 2016:”
– Payments for the transactions under all the exempted categories will now be accepted only through old Rs 500 notes. This means no Rs 1000 notes.
– Payment of School fees up to Rs 2000 per student in Central Government, State Government, Municipality and local body schools;
– Payment of fees in Central or State Government colleges;
– Payments towards pre paid mobile top-up to a limit of Rs 500 per top-up;
– Purchase from Consumer Cooperative Stores will be limited to Rs 5000 at a time;
– Payment of current and arrear dues to utilities will be limited to only water and electricity. This facility will continue to
be available only for individuals and households;
– Considering that the Ministry of Road Transport and Highways have continued the toll free arrangement at the toll plazas up to 2.12.2016, it has been decided that toll payment at these toll plazas may be made through old Rs 500 notes from 3.12.2016 to 15.12.2016.
– Foreign citizens will be permitted to exchange foreign currency up to Rs. 5000 per week. Necessary entry to this effect will be made in their passports.”
Jaitley pushes banks to promote digital transactions
Finance Minister Arun Jaitley is now saying that “one of the major objectives of withdrawal of legal tender status on Rs 500 and Rs 1000 notes was to move the Indian economy further towards digital transactions”, and that “physical currency must shrink” while the economy should expand, shifting more and more focus to digital currency.” So what’s going to happen now?
- Banks will now be focussing on significantly stepping-up transactions in mission mode through alternate banking channels such as NEFT, mobile wallets, pre-paid cards, QR codes, pay-roll cards, debit and credit cards and Unified Payments Interface (UPI).
- Banks will increase and sustain their focus on semi-urban and rural areas, with an outreach, via “an advertising campaign from Indian Bankers Association (IBA) including demonstration videos on how to use cards and other modes for cash less transactions.”
- Banks “will restart normal lending activities and in particular Mudra loans. These would help meet restocking requirements of enterprises by way of working capital delivered through Mudra cards.”
- Banks and NABARD have been asked to make currency available to DCCBs (District Co-operative Banks). On 23rd November, the Ministry had said thatNABARD has made available Rs.21,000 crores limit to the DCCBs through State Cooperative Banks for Rabi agricultural operations. “This will enable the DCCBs to sanction and disburse crop loans to the farmers through the network of Primary Agricultural Cooperative Societies (PACS). This will benefit more than 40% of the small and marginal farmers who avail institutional credit/crop loans. Further, additional limits will be provided by NABARD as per requirement.”
Track our demonetization live blog here.