Demonetisation: Currency recall could cost India a massive Rs 1.28 lakh crore, says CMIE

The cost of withdrawing high-denomination currency notes to wipe out black money from the country will be about Rs 1.28 lakh crore during the 50-day window till December 30, the Centre for Monitoring Indian Economy (CMIE) said.

The overall cost could be much higher, the private economy watcher estimated. The demonetisation invalidated 86% of the Rs 17.8 lakh crore of currency that was in circulation on October 28. “A steady stream of news reports of empty mandis, low footfalls at malls and drop in business in restaurants, stressed factories paint a grim picture of the effects of a sudden withdrawal of liquidity from markets,” CMIE said in a report on Thursday.

Emphasising that all estimates are conservative and limited to the 50-day window, CMIE said the government and the Reserve Bank of India are estimated to bear a cost of Rs 16,800 crore, largely on account of printing new currency notes and transporting them to banks, ATMs and post offices.

CMIE said businesses are expected to pay the biggest price of the demonetisation, which became effective on November 9, and the immediate impact could be about Rs 61,500 crore, or 48% of the total cost of the exercise.

“We estimate the direct impact on business in terms of the drop in discretionary spending by households. This alone adds up to more than half a trillion rupees during the 50-day period till end of December,” it said. After enterprises, the other big sector to get hit is banks, which, according to CMIE, “lose a lot more.”

Wage levels of bankers are higher than those of the average person in the queue and banks suffer overheads and operational costs in terms of recalibrating ATMs to dispense new notes. “Banks would do little else during this 50-day period and we estimate that they would bear a cost of Rs 35,100 crore,” it said.

People standing in queues to exchange or deposit old currency notes bear 12% of the total cost and could lose Rs 15,000 crore in foregone wages during the period. The long-term impact could be more, CMIE said.

“All estimates are admittedly conservative. All estimates are limited to the 50-day window. However, the impact of low liquidity, broken supply chains and loss of confidence in consumers is likely to impact the economy over a longer period,” CMIE said.



Source : Economic Times

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No more over-the-counter exchange of old notes

Facing severe attack in the wake of difficulties thrown up by demonetisation, government tonight extended till December 15 the facility of using old Rs. 500 notes in public utilities and included more services like mobile recharge but stopped the over-the-counter exchange of defunct currencies and use of Rs. 1,000 notes.

From now on payment of fees up to Rs. 2,000 per student has been allowed in schools and colleges run by central and states governments, municipalities and local bodies.

Payment towards pre-paid mobile top-up to a limit of Rs. 500 per recharge has also been allowed while purchase from consumer cooperative stores will be limited to Rs. 5,000 at a time, an official release said.

Current and arrears dues payments will be limited to only water and electricity, a facility that will continue to be available only for individuals and households.

However, the release said payments for the transactions under all the exempted categories will now be accepted only through old Rs. 500 notes.

“Considering that the Ministry of Road Transport and Highways have continued the toll free arrangement at the toll plazas up to December 2, it has been decided that toll payment at these toll plazas may be made through old Rs. 500 notes from December 3 to December 15,” it said.

Foreign citizens will now be permitted to exchange foreign currency up to Rs. 5,000 per week. Necessary entry to this effect will be made in their passports, it said.

Explaining the reason for discontinuance of exchange of the defunct notes, the release said it has been observed that over-the-counter exchange of the old notes has shown a declining trend.

It has further been felt that people may be encouraged and facilitated to deposit their old Rs. 500 and Rs. 1000 notes in their bank accounts. This will encourage people who are still unbanked, to open new bank accounts, it said.

Consequently, it said, there will be no over-the-counter exchange of old notes after midnight tonight.

The exemptions were initially announced by Prime Minister Narendra Modi when he disclosed the demonetisation scheme on November 8. Subsequently there have been modifications in these measures.

The release said the government has been reviewing the issues arising out of the cancellation of the legal tender character of the high denomination notes.

The Government has also been receiving various suggestions in this regard. After due consideration of all relevant aspects, decisions relating to certain operational aspects of the Scheme have now been taken, it said.

There has been large scale criticism of the government in the wake of severe hardships faced by a cross-section of people following demonetisation of high denomination currency.


Source : Thehindubusinessline

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60 per cent of SBI ATMs are calibrated, operational

As of Wednesday, State Bank of India has managed to calibrate 60 per cent of its ATMs.

The rest would be done within the next five days, the bank's Chairperson, Arundhati Bhattacharya, said on the sidelines of SBI's Community Service Banking organised at the bank's Administrative Office premises in Coimbatore.

She also admitted that though 60 per cent of the ATMs were calibrated, most of these automated teller machines were loaded with the new Rs. 2,000 currency, because the new Rs. 500 note was not available in the first few days. “It has just started to come in.”

“The machines have been calibrated to dispense the new Rs. 500 as well. Every State is getting covered, but at a slower pace. As the higher denomination currency came first, it was important to put in (load) some bulk. The new note will be available in Chennai from today and Coimbatore will get it soon enough. Once the new currency gets distributed we will load these on the ATMs,” she said.

She allayed rumours about the difficulty in getting the new Rs. 500 currency calibrated. “When we calibrated for Rs. 2,000, we did so for Rs. 500 as well,” she said.


Source : Thehindubusinessline

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SBI, associate banks merger on track

State Bank of India Chairman Arundhati Bhattacharya on Thursday said that the merger of associate banks with SBI is on track and remains unaffected because of the demonetisation move.

“There is a separate team working on this and they are not into demonetisation exercise,” she told reporters in Coimbatore.

She said the demonetisation exercise has impacted branch working. “But this has not impacted any other team working alongside. So the merger exercise is on track. We have to receive the Government approval, there are several steps along the way. Once approved, we will come together,” she said, unwilling to commit on a timeline.

The SBI chief is in the city to take part in a leadership summit titled “Insight – The DNA of Success”, organised by Isha Leadership Academy.


Source : Thehindubusinessline

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ATMs in rural areas are still a far cry

Remember the long queues at bank branches and spending hours to do a simple transaction such as cash withdrawal?

Most of you may not, because the advent of ATMs changed that trend a long time ago, providing customers access to money any time. But after the Centre announced the demonetisation scheme a fortnight ago, people in cities and metros were seen queueing up outside ATMs to do a simple cash withdrawal. And this, when over 80 per cent of the 2.15 lakh ATMs as of June 2016 are in metro, urban and semi-urban areas.

With only 40,000-odd ATMs available in rural areas, access to money in the remotest parts of the country posed a greater challenge. While public sector banks operate only about 20 per cent of their ATMs in rural areas, the reach of private banks in the hinterland is far poorer with just 8 per cent of their ATMs in these areas.

According to data put out by the RBI, State Bank of India has the highest number of ATMs in the country operating 49,669 ATMs as of June 2016, followed by ICICI Bank, Axis, HDFC Bank, Canara Bank and Bank of Baroda.
Bunched up

All the top banks have over three-fourth of their ATMs in urban, metro and semi-urban areas. There are a few banks such as UCO Bank, United Bank, Punjab and Sind Bank that have a higher — 34-38 per cent of their branches in rural areas. But given that ATMs of these banks are fewer in number (less than one to one per cent of the total number of ATMs), it does not help in better reach.

SBI has a little under 8,000 ATMs in rural areas; the second largest network belongs to Punjab National Bank with a far lower number of around 2,700. The count reduces significantly to less than 1,000 ATMs after the top 10 banks.

The National Payments Corporation of India (NPCI) puts out a more granular data covering all members of the National Financial Switch — the largest network of ATMs in India. This includes 99 direct member banks, 587 sub-member banks, 56 Regional Rural Banks (RRB) Banks and eight white label ATM providers as of October 2016.

The weak penetration of ATMs across the country is starker in the figures put out by the NPCI. As of October 2016, there are 2.3 lakh ATMs across the country.

Of this about 92 per cent are operated by direct member banks. Sub- member banks and RRBs put together have only about 3,700 ATMs. The rest are white-label ATMs.

One of the initiatives that the RBI took a couple of years back, was to grant licences to non-bank entities to set up white-label ATMs (WLAs) in the country. The main objective of this was to expand reach of ATMs in semi-urban and rural areas, where banks were not able to put up ATMs. Under the RBI’s guidelines, a minimum number of WLAs have to be installed in Tier-III to -VI centres, depending on the scheme opted by each player.

White-label ATMs

Hence almost 41 per cent of WLAs operate in rural areas. However since the total number of WLAs itself is significantly smaller than bank-operated ATMs, access to money still remains a challenge. As of October 2016, there were just 14,427 white label ATMs. Of the 8 players in this market, two players — Tata Communications Payment Solutions (8, 941) and BTI Payments (4, 087) — alone constitute 90 per cent of total white label ATMs. The number of ATMs set up by rest of the players, are far lower in the tally.

With the number of transactions failing to scale up in these remote areas, WLA operators have found it difficult to generate revenues and hence expand further.


Source : Thehindubusinessline

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