November 16, 2016: The government of India took a big step to uncover the black money in the country. The government demonetized ₹500 and ₹1000 banknotes on 8th November, 2016 and ceased the use of the banknotes in any form of legal tender in India.
Prime Minister Narendra Modi addressed the people in an unscheduled live televised address at 8:15 pm the same day. In the announcement, Modi declared the usage of ₹500 and ₹1000 banknotes and told everyone that the notes can be exchanged at the banks until December 30. But a long queue outside every ATM and bank has hampered the process, mentioned Reuters.
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It seems that RBI was not prepared to face the demonetization. RBI didn’t have enough supply of the notes for the exchange. Also, the new notes of ₹2000 are of different size and so the ATM machines need to be modified to dispense the notes. There is a long queue of people waiting to exchange their notes. ATMs are running out of cash faster as they can dispense only ₹100 notes.
The under-preparedness of government has led to the creation of extreme chaos. The move is considered economically imprudent.
According to Reuters report, people are desperate for cash and so the workforce is wasting long hours standing in the long queues at the Banks and the ATMs. The abrupt call-back for the 86% of the country’s cash has brought the economy to a standstill. The wide conjecture on property and gold has affected the economic stability and investments.
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The people most hard hit by the demonetization are the ones in the rural areas who do not have a bank account. Indians who rely on cash for their daily transactions are struggling to pay for the basic commodities.
In a political rally in Uttar Pradesh, Modi said, “I am aware you are facing difficulties… I understand the inconvenience.”
“I am really pained by the inconvenience and that is why I am working tirelessly to help people overcome this situation.”
“I will never let anyone loot money that belongs to India’s poor.”
The government has been trying hard to deal with the cash crunch. New micro cash machines will be installed across the country and banks are asked to waive off the transaction charges on credit and debit cards.
India’s secretary for Economic Affairs, Shaktikanta Das, told reporters that government has increased the weekly withdrawal limit from 20,000 to 24,000. He also said that the re-calibrated cash machines would start to dispense new 2,000 rupee notes within two days.
The government has allowed a network of banking correspondents to provide people from rural area access to the banking services.
New Delhi, November 8, 2017 : On November 8 2016, every Indian citizen sat glued to their TV screens as Narendra Modi was set to make a big announcement. Outcome? The Indian Prime Minster shocked the entire nation with the introduction of Demonetisation, a move that was to change the very foundation of the cash-dependent Indian economy.
The much-debated move by Modi garnered the attention of several well-versed economists from the country and abroad, alike. While some people willingly welcomed the move, there were others who stood in staunch criticism.
As the move completes its first year, the Bharatiya Janata Party (BJP) is set to observe November 8 as ‘anti-black money day’ to celebrate Demonetisation anniversary in the country.
On the eve of the Demonetisation anniversary, the BJP released a cheeky video claiming to depict how ‘corrupt’ politicians have been criticizing the move, as the nation won following demonetisation.
In the video, the BJP attempted to take a dig at corrupt politicians, who have been criticizing PM Modi’s Demonetisation move.
In the video, a woman, playing the character of a frustrated, corrupt politician can be seen going on a rant over PM Modi’s note ban initiative, which was aimed to combat black money, corruption, fake currency and terrorism.
The video ends with a voice-over saying demonetisation has not only brought out this frustration of corrupt citizens, but also black-money, claiming that almost 99 per cent cash which was previously lying hidden with people has now entered the banking system.
The one-minute video, which is now going viral on social media, has already been re-tweeted more than 2 thousand times since it was released on November 7, on the eve of demonetization move.
Ahead of the Demonetisation anniversary, the last few days have witnessed several leaders present their opinions on PM Modi’s demonetization move.
Finance Minister Arun Jaitley called PM Modi’s note ban initiative a ‘watershed moment’ while Piyush Goyal, Minister of Railways believes the move has pushed India towards a more transparent economy.
However, the move is being criticized by ex-Prime Minister Manmohan Singh calling it ‘irresponsible’. The opposition maintains that PM Modi’s note ban initiative has caused reckless damage to the country and the Indian economy.
On Demonetisation anniversary, the BJP is set to observe November 8 as ‘anti-black money day’, while opposition leaders are set to observe the day as ‘black day’ in protest against the note ban initiative.
New Delhi, November 3, 2017: The backbone of India’s manufacturing sector — micro, small and medium enterprises (MSMEs) — had not yet recovered from the demonetisation move when the Goods and Services Tax (GST) came in to add to the pain, according to industry stakeholders.
“The base of the MSME pyramid is comprised of informal sector, which has traditionally done business in cash. With withdrawal of cash, this market seized up for a quarter or so. They (MSMEs) are limping back to normality,” Anil Bhardwaj, Secretary General, Federation of Indian Micro and Small and Medium Enterprises (FISME), told IANS.
“The recovery is slow because of the new disruption in the form of GST. In the short term, there could be loss of business opportunities because of lack of capital in the informal markets,” he said.
Bhardwaj said that the housing sector, which had more than 60 product categories linked to MSMEs, was drastically hit, both directly and indirectly.
According to D.S. Rawat, Secretary General of Assocham, except for some payment gateways, most of the sectors lost out.
“The impact of demonetisation would have evaporated, but the GST roll-out issues are being braved by some sectors, particularly the SMEs and the traders,” Rawat told IANS.
In the Economic Watch report by Ernst & Young for September 2017, demonetisation has been blamed for an adverse impact on the economy in the short run, as its “benefits are yet to overtake” the costs.
“The government and people at large did have to bear considerable costs in the immediate aftermath of demonetisation. Some of these costs may be difficult to quantify, but objective evidence of the short-term costs is available in at least some important dimensions,” the report said.
“There was an erosion of growth, output and employment,” it added.
The overall economic growth is still contested, however, as some argue that the downward spiral in gross domestic product (GDP) growth preceded demonetisation.
“Though the GDP growth has been lower post the exercise, it will not be fair to conclude that demonetisation was the only factor responsible for this. The growth had started slowing right after the third quarter of 2016-17 and the trend continued post-November as well,” said Ranen Banerjee, Partner-Public Finance, Economics and Urban, at PwC India.
Others like the EY’s report indicate that demonetisation resulted in a “tangible adverse impact” on GDP growth.
“Real GDP growth has been falling steadily quarter after quarter since the fourth quarter of FY16, when it was nine per cent. It fell to 5.7 per cent in first quarter FY18, a decrease of 3.3 percentage points,” the report pointed out.
“The two quarters that can be considered as the demonetisation quarters in FY17 were the third quarter of FY17 and fourth quarter of FY17. In these two quarters, the GDP growth rate fell to seven per cent and 6.1 per cent, respectively.”
It mentioned that the downward trend in growth preceded demonetisation and was largely caused by an investment slowdown.
On the industrial production front, in December 2016, the Index of Industrial Production (IIP) had contracted by 0.4 per cent from a 13-month high of 5.7 per cent reported for November.
However, it rose 2.7 per cent in January 2017. The latest IIP figures for August showed that factory output grew 4.3 per cent against the same month last year on the back of robust mining and electricity sector growth.
According to the Ministry of Statistics and Programme Implementation, manufacturing output in the country in July 2017 had grown marginally by 1.2 per cent.
“The event clearly pushed the economy towards a higher degree of digitisation and financial inclusion. Accordingly, the digital finance sector seems to have gotten a push while over the longer term financial services should be the biggest gainer,” said Anis Chakravarty, Lead Economist, Deloitte.
(Rohit Vaid can be reached at email@example.com)
(Editors: The above article is part of a series of demonetisation stories leading up to November 8)
Reserve Bank of India (RBI) did issue a statement saying that the supply of the new Rs 200 notes would soon be ramped up
The entire process of recalibration can be completed within 90 days without affecting the regular functionality of ATMs to a large extent
The ATM companies said that they were expecting to receive official communication on recalibration of ATMs soon
New Delhi, September 4, 2017: While the RBI launched the new Rs 200 notes a week ago, it may take up to three months for ATMs to start dispensing the new denomination currency “new Rs 200 note” as it will involve a huge exercise of recalibration.
What are ATM companies saying about when will the new Rs 200 notes come into the market?
Some banks have even asked the ATM companies to begin testing the new Rs 200 notes for recalibration of the machines, though they have not got supplies of the new Rs 200 notes/ currency. Only last year, the banks were involved in the recalibration of ATM machines after the demonetization of high-value currency notes in November.
ATM manufacturing companies said that they have not received any directive from the RBI regarding the recalibration of ATMs for the new Rs 200 note. They disclosed that some banks have at an informal level have asked them to start testing of the new note since it is of a different size.
When will the supply of the new Rs 200 notes see an increase?
Reserve Bank of India (RBI) did issue a statement saying that the supply of the new Rs 200 notes would soon be ramped up but has not given any time-frame by which it will be available in adequate numbers.
It is yet to be seen whether all the 2.25 lakh ATM machines across India would be recalibrated for dispensing the new Rs 200 notes.
avi B Goyal, Chairman, and Managing Director, AGS Transact Technologies Limited, which claims to have an installed base of 60,000 ATMs, told IANS, “The process of recalibration will begin once we receive the directive from the RBI. The size of the new Rs 200 notes are different from the existing ones and so, once we receive the new Rs 200 notes, we will have to understand its dimensions and accordingly reconfigure the ATM cassettes. Next, we will have to check if the supply of new Rs 200 notes is good enough to run the cassettes at full capacity.”
“The entire process of recalibration can be completed within 90 days without affecting the regular functionality of ATMs to a large extent. In fact, the ATMs will continue to be fully operational during recalibration and will continue to supply Rs 100, Rs 500 and Rs 2,000 denominations,” he said.
Among the other companies operating in the sector are NCR Corporation, which has over 1,08,000 machines, and BTI Payments, which has 4,500 cash dispensers. NCR Corporation said that while some banks have reached out to them to start testing of the new Rs 200 notes, they were yet to receive the supply to begin the process.
“Banks have started getting in touch with us for testing the same “new Rs 200 notes”. They will let us know which machines they wish to configure for new rs 200 notes, which will require physical visits to ATMs. However, the new Rs 200 notes are still to be provided to us by the respective banks so that the testing can begin,” Anand Garollu, General Manager (Services), NCR Corporation said.
K. Srinivas, Managing Director, and CEO of BTI Payments, a RBI-licensed firm that operates cash dispensers not owned and managed by banks, said, “Recalibration will begin as and when we receive adequate quantity of new Rs 200 notes. We are looking to roll this out as quickly as possible.”
He said that the industry was expecting new Rs 200 notes to be available over a period of time across various geographies.
“The recalibration can be done progressively as and when the new denomination note starts to become available. Unlike the last time around (during demonetization), when we had to recalibrate all machines in one go,” Srinivas added.
The ATM companies said that they were expecting to receive official communication on recalibration of ATMs soon. However, emails to RBI in this regard did not elicit any reply, they said.
“The production of these “new Rs 200 notes” is being ramped up by the currency printing presses and over time, as more notes are printed, it will be distributed across the country through the banking channels and will be available for the public in adequate quantity,” the RBI had said in a statement.
Currently, new Rs 200 notes are available only through select RBI offices and some banks.
While State Bank of India and Punjab National Bank are reported to have received the new Rs 200 notes, Eknath Baliga, Manager, KYC-Antimoney Laundering Cell, Corporation Bank, Mangalore, told IANS that none of its branches across the country had received the new Rs 200 notes so far.
The new Rs 200 notes are currently being printed only by RBI presses. Security Printing and Minting Corporation of India (SPMCIL) sources told IANS that the company has not received any indent so far for the printing of new Rs 200 notes. India’s two currency presses are owned by RBI and two by SPMCIL, which is a government-owned company.
How ATM recalibration happens:
Usually, an ATM holds four cassettes — three of which can continue to be used for Rs 100, Rs 500, Rs 2,000, and the fourth cassette can be used for the new Rs 200 notes. On an average, each cassette has a capacity to hold 2,000-2,500 notes depending upon the quality of cash issued by banks. However, there are many ATMs that only have either two or three cassettes.
The number of slots in the ATM can be configured as per the bank’s preference. The banks decide which denomination needs to be configured in a machine on the basis of the customer profile in the area where the ATM is located and the number of transactions on that machine.
The banks need to make requisite changes at their ATM switch before the rollout of the physical recalibration at the ATMs in the field.
The recalibration of a new denomination takes 30-45 minutes per ATM. The process of recalibration is not very difficult but is time-consuming given an engineer has to visit every ATM and configure it to dispense the requisite denomination.
The introduction of the Rs 200 note has been welcomed as it would ease the currency circulation in the market as people prefer lower denomination cash withdrawals from ATMs. Rs 200 would also be more convenient for rural consumers. (IANS)