Currency Demonetisation and Future course of Indian Economy

Kakkaji · Post by **Kakkaji** » 15 Dec 2016 06:36

Back-dated FDs may be behind huge deposits by cooperative banks, suspect taxmen

MUMBAI: The I-T department is cautiously treading on a tricky political terrain: cooperative banks and credit societies.

While scanning the numbers received from large banks, the tax office has spotted an unusual surge in deposits from state and district cooperative banks and societies into scheduled commercial banks where they have accounts.

The department, according to a tax official, suspects that several banks and societies — which were disallowed from either exchanging or accepting the old 500/1,000 rupee notes as deposits — may have booked back-dated fixed deposits by either shutting down or manipulating their computer systems.

Indeed, a week after the 8/11 announcement of demonetisation, four large banks — three public sector and one private lender — alerted the Reserve Bank of India about the sudden rise in the flow of deposits from cooperative banks located in and around eastern Maharashtra, a source in the banking industry told ET.

Kakkaji · Post by **Kakkaji** » 15 Dec 2016 06:38

Domestic black money is useful but stashed abroad is treason: Ajit Doval and S Gurumurthy

NEW DELHI: Domestic black money is at least productive, but black money stashed abroad is treason, and it doesn’t benefit Indians — thus went the strong argument in a 2011 research report commissioned by BJP and co-authored, among others, by two of the most influential people in the ruling political establishment, National Security Adviser Ajit K Doval and Swadeshi Jagran Manch co-convener S Gurumurthy

KLNMurthy · Post by **KLNMurthy** » 15 Dec 2016 06:39

When thinking about the currency demonetization and its success or failure, it seems to me that a lot depends on what kind of psychological impact this step has on those that have been using large unaccounted cash transactions to evade taxes, collect bribes etc.

This present step of demonetization is already done, for better or for worse. No one can reverse it, not even the Supreme Court, and no amount of street agitation will change what has already been done. The government simply won't reverse the step.

So, why go to all the trouble to paralyze parliament, get the Supreme Court to make threatening noises, accuse Modi of personal corruption, call for street riots and so on and so forth? The political-bureaucratic corrupt entrenched interested are fools and incompetents in so many ways, but not so much when it comes to their own interest. They are seasoned and wise warriors in this aspect, and it would be an error to underestimate them or dismiss them.

I think, from their point of view, it is important to fight for the future, even though nothing can be done for the present as such. Can this kind of demonetization, or some other big and audacious action be taken again, by this or a future government?

If they believed that there is a significant likelihood that, once the taboo against this kind of high-denomination demonetization--without warning--has been broken, the same government, or a later government can do it again and again, each time without warning, they would be forced to minimize their risk by minimizing the amount of hoarded cash, or cash buffer or whatever we may call it. The longer a high-denomination note stays in circulation, the lower its value (in some stock market-like psychological sense, not in the face value sense), because at any instant (with probability increasing over time, in the mind of the individual) the note will stand to lose a chunk of its value to the taxman by having to be properly accounted for; in the worst case, its value may become zero, if the cost of the risk and trouble of accounting for it outweighs its face value.

On the other hand, if somehow the persons involved in large unaccounted cash transactions can manage the politics so that they can be reasonably sure that the government has been taught such a lesson by being dealt a colossal political blow that neither this government, nor any future government will dare to ever repeat this action, then they can go back to business as usual--corruption and cheating the taxman, which is actually cheating the poor and middle class of the country who depend on having a decent public infrastructure.

Hence all the vigorous fighting back against demonetization that is going on. I think Modi is wise enough to understand that the message has to be that huge and drastic steps can and will be taken time and again. I can't discern from his words whether he actually understands and realizes that this is the key message that he has to focus on. My concern is because the messaging from him and his government, has so far been very ad hoc, undisciplined, hit-or-miss.

Let us see how it plays out.

KLNMurthy · Post by **KLNMurthy** » 15 Dec 2016 06:44

SSharma wrote:murthy saar, do not count on being able to exchange dollars or any currency at a fair rate.
you would be lucky to be able to exchange them at all, i was at rgia last week, at least the atms were out of cash.

your best bet would be to get a friend to set up an ola account for you and put some cash in it.
you can take the user/pass from him and use the app on your smartphone to get you from point A to B - can book the ride even before you get out of the airport.

whatever INR you are able to procure, save it for emergencies, go as cashless as you can - in a city like hyd you have no excuse for not going cashless.

Thank you SSharma garu. I was worried that, even at an unfair rate, I may just not be able to get any INR for my USD at the airport, and you have made me see that my worry is not groundless.

I didn't think of the ola account idea. On my recent trip, I just used cash for ola, and never set up an account, but I'll do this so that I am not stuck at the airport with family.

Unfortunately I don't have a debit card, though I have an atm card. I am hoping to be able to use my US credit card for most sizable purchases, and maybe write cheques or something.

It'll be an adventure.

KLNMurthy · Post by **KLNMurthy** » 15 Dec 2016 06:49

SSharma wrote:murthy saar, do not count on being able to exchange dollars or any currency at a fair rate.
you would be lucky to be able to exchange them at all, i was at rgia last week, at least the atms were out of cash.

your best bet would be to get a friend to set up an ola account for you and put some cash in it.
you can take the user/pass from him and use the app on your smartphone to get you from point A to B - can book the ride even before you get out of the airport.

whatever INR you are able to procure, save it for emergencies, go as cashless as you can - in a city like hyd you have no excuse for not going cashless.

By the way, are the ATMs inside the international terminal itself, or somewhere outside the airport area? I couldn't quite identify from Google maps.Sorry for the detailed questions, but so far, I never had to use either the ATMs or the currency exchange, since I have always kept a few thousand rupees (unfortunately for me, only in 500s or 1000s) with me to get me into town and see me through the first day or two.

Viv S · Post by **Viv S** » 15 Dec 2016 07:16

KLNMurthy wrote:Unfortunately I don't have a debit card, though I have an atm card. I am hoping to be able to use my US credit card for most sizable purchases, and maybe write cheques or something.

I suggest you get an account on PayTM before hand and use your credit card to top it up. It'll work on Ola, Uber, IRCTC et al.

Get a new SIM (I'd suggest Airtel) at the airport or borrow one from a relative if possible. (You can also get a cheap GSM phone there in case you don't have an unlocked one.) It'll be operational within 24 hrs, usually within 12 hrs, and thereafter you'll be fine in Metros and most Tier II cities.

Primus · Post by **Primus** » 15 Dec 2016 07:17

KLNMurthy wrote:A personal query:

Am planning to travel from US to Hyderabad later this month. I'll have to exchange USD for rupees before I can pay for a cab, buy some breakfast etc.

Does anyone have any information on the state of the currency exchange at Hyderabad airport? Can i count on reliably being able to exchange even a small amount, e.g, USD 100 for rupees?

thanks for any info.

Murthy Ji, what a coincidence, I too am traveling to Hyd 1st week Jan, hopefully by then the troubles would be a bit less.

My strategy when traveling abroad (including poorer nations like Kenya, Botswana, Tanzania) is to simply use the local ATM and use my BankofAmerica ATM card to withdraw money. I can get the local equivalent of at least $500 at a time and I get the best exchange rate (much better than the cash exchange bureaus). It is also much safer than carrying a lot of USD.

My problem in Hyd will be if the ATMs do not put out much cash and what to do if it only comes out in 2000 notes. I will definitely need some kind of a Paytm or similar account. Not having a local phone is also going to be a bummer. Credit cards can of course work with larger establishments but may not be accepted everywhere.

It will be fun figuring all this out.

Primus · Post by **Primus** » 15 Dec 2016 07:19

Viv S wrote:
KLNMurthy wrote:Unfortunately I don't have a debit card, though I have an atm card. I am hoping to be able to use my US credit card for most sizable purchases, and maybe write cheques or something.
I suggest you get an account on PayTM before hand and use your credit card to top it up. It'll work on Ola, Uber, IRCTC et al.

Get a new SIM at the airport or borrow one from a relative if possible. (You can also get a cheap GSM phone there in case you don't have an unlocked one.) It'll be operational within 24 hrs, usually within 12 hrs, and thereafter you'll be fine in Metros and most Tier II cities.

Ah, that may work. Thanks Viv Ji.

SSharma · Post by **SSharma** » 15 Dec 2016 08:02

If you get a relative to buy a new SIM for you, I know for a fact that jio and voda are activated within an hour if you buy using aadhar and fingerprint.

Ola has an offer, if you put 1k or above in their ola money thing, they give you prime sedan rides at mini prices, plus no peak pricing. Money well invested as far as I was concerned.

Best is paytm but I never used it, China and all that.

GopiD · Post by **GopiD** » 15 Dec 2016 08:19

Suraj sir and other heavy weights here, help me answer the below question please. Its from WhatsApp.

Q : What's wrong with Cashless Transaction?
A:
Quote * Sir think that a 100 rupee note is circulated 1,00,000 times it will have the same value no body get any commission.

But, if it is circulated through cashless way each transaction fetches 2.5% commission that means 1,00,000 times 2.5% = 2500% i.e. Rs. 2,50,000 (Rs. Two Lakhs fifty thousand Rupees) to service providers like Paytm or Jio Money etc. Just for hundred rupees.

So, it's a perpetual golden egg laying goose gifted to the gang.
That's why this is the Mother of All Scams"*

Pratyush · Post by **Pratyush** » 15 Dec 2016 08:45

GopiD wrote:Suraj sir and other heavy weights here, help me answer the below question please. Its from WhatsApp.

Q : What's wrong with Cashless Transaction?
A:
Quote * Sir think that a 100 rupee note is circulated 1,00,000 times it will have the same value no body get any commission.

But, if it is circulated through cashless way each transaction fetches 2.5% commission that means 1,00,000 times 2.5% = 2500% i.e. Rs. 2,50,000 (Rs. Two Lakhs fifty thousand Rupees) to service providers like Paytm or Jio Money etc. Just for hundred rupees.

So, it's a perpetual golden egg laying goose gifted to the gang.
That's why this is the Mother of All Scams"*

These guys operate as per RBI mandate. The fee is within the mandate stipulated by RBI. If it is a scam, it is on RBI's door step.

shiv · Post by **shiv** » 15 Dec 2016 09:12

GopiD wrote:Suraj sir and other heavy weights here, help me answer the below question please. Its from WhatsApp.

Q : What's wrong with Cashless Transaction?
A:
Quote * Sir think that a 100 rupee note is circulated 1,00,000 times it will have the same value no body get any commission.

But, if it is circulated through cashless way each transaction fetches 2.5% commission that means 1,00,000 times 2.5% = 2500% i.e. Rs. 2,50,000 (Rs. Two Lakhs fifty thousand Rupees) to service providers like Paytm or Jio Money etc. Just for hundred rupees.

So, it's a perpetual golden egg laying goose gifted to the gang.
That's why this is the Mother of All Scams"*

Not a heavy wt. But I get 100 note & visit a whore. Whore gets clothes ironed for same note. Ironing lady buys veg with my note. Veg seller buys booze. Booze seller visits same whore

My 100 goes a long way buys several 100 worth services and goods.

Nitesh · Post by **Nitesh** » 15 Dec 2016 09:23

corss post:

5000 cr in 4 days

http://timesofindia.indiatimes.com/city ... 989956.cms

arshyam · Post by **arshyam** » 15 Dec 2016 09:25

^^ In theory that's possible with e-transactions too. Cash is only the medium of exchange, e-money is another medium.

In general, when someone brings in superlatives like "mother of all <fill in the blank>", I lose interest. It only sounds like a lot of hand-waving, much like our mother-of-all-deals for the Rafale

GopiD, think of it this way. For regular transactions, cash requires no infra other than a wallet. It's old tech and so everyone is familiar with it. The electronic method is relatively new and needs expensive infra to operate (think networks, data centres, servers, power, etc.). So some transaction fee might be charged. The RBI has set limits on these as appropriate. Now, this can be spun to mean corruption to benefit someone, but it can equally be spun the other way like a doosra: these infra-supporting companies need people to run them, so they will hire more people as business grows. So that transaction fee is put to use and not sitting in someone's pocket. This money also has a multiplier effect, since it goes through banks. S Gurumurthy mentioned in his talks on how money in banks multiply significantly, when compared to black cash.

Next, if one or two entities is benefited due to a certain action, corruption can be alleged. But in this case, the entire banking ecosystem benefits - right from Visa, MC, Rupay to the humble factory producing the cards. Not to mention the banks which will have more money to lend, etc. So best to not look at it from a single dimension.

P.S. No heavyweight either, but adding some points till some real ones step in.

Suraj · Post by **Suraj** » 15 Dec 2016 09:34

GopiD wrote:Suraj sir and other heavy weights here, help me answer the below question please. Its from WhatsApp.

Q : What's wrong with Cashless Transaction?
A:
Quote * Sir think that a 100 rupee note is circulated 1,00,000 times it will have the same value no body get any commission.

But, if it is circulated through cashless way each transaction fetches 2.5% commission that means 1,00,000 times 2.5% = 2500% i.e. Rs. 2,50,000 (Rs. Two Lakhs fifty thousand Rupees) to service providers like Paytm or Jio Money etc. Just for hundred rupees.

So, it's a perpetual golden egg laying goose gifted to the gang.
That's why this is the Mother of All Scams"*

Why is it a scam ? It's a fee for using a service that PayTM operates for your convenience . They run a large back end and pay for the infrastructure and service platform out of those fees. The fees themselves are within RBIS limits , and anyone else can compete with them with lower fees. You're not constrained to use just PayTM . You can use other options, cash and cashless . By the way credit cards like Visa and MC have similar fees . There's no scam here .

Merril · Post by **Merril** » 15 Dec 2016 09:43

GopiD wrote:Suraj sir and other heavy weights here, help me answer the below question please. Its from WhatsApp.

Q : What's wrong with Cashless Transaction?
A:
Quote * Sir think that a 100 rupee note is circulated 1,00,000 times it will have the same value no body get any commission.

But, if it is circulated through cashless way each transaction fetches 2.5% commission that means 1,00,000 times 2.5% = 2500% i.e. Rs. 2,50,000 (Rs. Two Lakhs fifty thousand Rupees) to service providers like Paytm or Jio Money etc. Just for hundred rupees.

So, it's a perpetual golden egg laying goose gifted to the gang.
That's why this is the Mother of All Scams"*

Not a heavy weight at all. But I'll try answering using shiv sir's analogy methodology (damn that rhymes!!).

Let's say I wanted to pass on a message to you. I could walk up to and whisper in your ears 'Rahul Gandhi is corrupt'. You could whisper this into your friends ear and so on and so forth, until the whole of India learnt of the earth sharing truth of Pappu ji's honesty, or lack of it. Total relevant cost - zero.

Same analogy, but all of us are lazy and all we want to do is sit and speak to each other on the phone. By the time time the country learns of the earth shattering truth a bunch of telecom/ISP/hardware middle men just took out their pound of flesh in terms of 'service fees'.

Similarly, while using e money, you are paying for convenience. In the event that you are willing to transact using cash for free, your call. Stand inline get the notes and transact.

Deans · Post by **Deans** » 15 Dec 2016 09:49

Pay TM's transaction fee for merchants is 1.99% it will only go down as competition increases and transaction volumes go up exponentially
- a mostly fixed back end cost can be apportioned over a larger no of transactions.
The Rupay debit card charges merchants 50 paise per transaction and that will put pressure on Mastercard and visa.

Over time, the UPI app of banks, which have 0 cost to the merchant, will start competing with the likes of Pay TM. That will be the real game
changer, in my view.

Cash has a cost as well. Cash pick up services cost Rs 3000 /month for a daily pick up (that is usually the opportunity cost of the merchant sending chotu to the bank, to deposit cash). Losses due to lack of change, fake notes, lost notes/theft are a min of another Rs 2000. Cost of change is
(getting coins) about Rs 1000 p.m. So the cost for a merchant doing business of about 6 lac p.m, in cash is around 1%

Dasari · Post by **Dasari** » 15 Dec 2016 09:56

The day I landed in India, demonetization was announced. Luckily I maintain a post paid sim from airtel. That took care of mobile phone. Used my credit card on my NRE account for rest of my 3 weeks stay. Transportation was piece of cake as I was able to use uber everywhere ( Delhi, Pune, Bangalore, Hyderabad, Vizag and Tirupati). Managed with very little cash.

The only bad part was in paying tips. Normally try to be very generous in paying tips as a way of my contribution to less fortunate people. This time I had to conserve my money and felt very bad about this. If you plan properly as a traveler it is not hard to manage with card.

Rudradev · Post by **Rudradev** » 15 Dec 2016 09:57

Suraj wrote:
GopiD wrote:Suraj sir and other heavy weights here, help me answer the below question please. Its from WhatsApp.

Q : What's wrong with Cashless Transaction?
A:
Quote * Sir think that a 100 rupee note is circulated 1,00,000 times it will have the same value no body get any commission.

But, if it is circulated through cashless way each transaction fetches 2.5% commission that means 1,00,000 times 2.5% = 2500% i.e. Rs. 2,50,000 (Rs. Two Lakhs fifty thousand Rupees) to service providers like Paytm or Jio Money etc. Just for hundred rupees.

So, it's a perpetual golden egg laying goose gifted to the gang.
That's why this is the Mother of All Scams"*
Why is it a scam ? It's a fee for using a service that PayTM operates for your convenience . They run a large back end and pay for the infrastructure and service platform out of those fees. The fees themselves are within RBIS limits , and anyone else can compete with them with lower fees. You're not constrained to use just PayTM . You can use other options, cash and cashless . By the way credit cards like Visa and MC have similar fees . There's no scam here .

I am no heavyweight but will add to Suraj's points.

The 2.5 lakhs generated by cashless transactions are not a scam, but wealth creation. That money, generated because of cashless transactions, can be used by PayTM, Reliance etc. to:
-Hire more people (create jobs)
-Train more people (skill development)
-Invest in tech

And of course, since that money is a taxable earning for PayTM or Reliance, it will contribute to revenue generation for the benefit of all.

Meanwhile let's look again at that 100 Rs note in a cash-only economy. The assumption that it will change hands 1 lakh times is itself a false premise. Who can say for sure it will do that? It is easy to conceal in the black economy and, compared to cashless currency, difficult or impossible to tax. More than likely it will remain hidden for 5 years in some petty neta's mattress, and be used on election day to buy liquor + Ambur biriyani for some secular miscreants in exchange for goonda-gardi services.

Which way does the Rs 100 serve you, me, and the country better?

Dasari · Post by **Dasari** » 15 Dec 2016 10:03

Deans wrote:Pay TM's transaction fee for merchants is 1.99% it will only go down as competition increases and transaction volumes go up exponentially
- a mostly fixed back end cost can be apportioned over a larger no of transactions.
The Rupay debit card charges merchants 50 paise per transaction and that will put pressure on Mastercard and visa.

Over time, the UPI app of banks, which have 0 cost to the merchant, will start competing with the likes of Pay TM. That will be the real game
changer, in my view.

Cash has a cost as well. Cash pick up services cost Rs 3000 /month for a daily pick up (that is usually the opportunity cost of the merchant sending chotu to the bank, to deposit cash). Losses due to lack of change, fake notes, lost notes/theft are a min of another Rs 2000. Cost of change is
(getting coins) about Rs 1000 p.m. So the cost for a merchant doing business of about 6 lac p.m, in cash is around 1%

What is the convenience fee Paytm charges on card? I heard this is high. Visa/MC/Amex charge anywhere between 2-3% based on merchant industry and the type of transaction ( a card not present will attract higher fee). So Paytm is competitive on the merchant side.

rohiths · Post by **rohiths** » 15 Dec 2016 10:19

Cash has an opportunity cost and not a manifest cost.
a) Loss of interest on cash. $100 Billion of cash implies $4 Billion lost per year in lost interest cost (SB interest @4% pa)
b) Costs of managing cash- Security, Handling, Change, manpower
c) Costs of printing & distribution - Borne by RBI and banks and charged ultimately to citizens
d) Cost of theft- Mainly for companies & enterprises

Ofcourse this does not include the cost of corruption, tax evasion, illegal activities, cost of police to prevent theft

If you include all this, cash is the costliest payment instrument available. The 1% transaction cost for electronic instruments is nothing when compared to cash

Yagnasri · Post by **Yagnasri** » 15 Dec 2016 10:21

Most of them pay for e-payment from banks wherein charges are quite low than paytm. Just read how banking creates money. Bank deposits are not kept ideally, the money is lent to businesses and them purchase machinery and other productive assets, and they employ people, and them in turn purchase goods and services, and those people in turn purchase things they need. So the economic activity goes on. The more the balance in SB and Current accounts (called as CASA) the less is the cost of the funds for the banks. Cost of funds meaning the average cost of interest + other costs for mobilising the funds etc. Since those two types of accounts will not have interest cost or have them very low interest like 4.5% for SB accounts, these kinds of funds will make the cost of interest to the banks low and makes it possible for them to lend at a very low-interest rate. SBI has huge CASA deposits and thereby lending at a very low rate when compared to say Karur Vysya Bank which has very low CASA funds. Low-interest rates will help to motivate people to borrow more for their businesses etc thereby the GDP will raise. So if we are using all our money in e-banking mode it will keep the rates of lending by banks low and increase economic growth.

End of my mango man ideas.

A_Gupta · Post by **A_Gupta** » 15 Dec 2016 10:37

All I know is that gas stations (petrol stations) around in the US northeast charge $0.10 per gallon more for paying with a card than for paying with cash. Evidently the risk of getting robbed by someone with a gun, or the supposed hassles of handling cash are worth getting $0.10 less per gallon rather than paying the fee to the card provider. (At current gas prices, that $0.10 is about 4%).

Being forced to go cashless is simply wrong. It doesn't make demonetization a bad thing, or **encouragement** of going cashless wrong.

saumitra_j · Post by **saumitra_j** » 15 Dec 2016 10:48

GopiD wrote:Suraj sir and other heavy weights here, help me answer the below question please. Its from WhatsApp.

Q : What's wrong with Cashless Transaction?
A:
Quote * Sir think that a 100 rupee note is circulated 1,00,000 times it will have the same value no body get any commission.

But, if it is circulated through cashless way each transaction fetches 2.5% commission that means 1,00,000 times 2.5% = 2500% i.e. Rs. 2,50,000 (Rs. Two Lakhs fifty thousand Rupees) to service providers like Paytm or Jio Money etc. Just for hundred rupees.

So, it's a perpetual golden egg laying goose gifted to the gang.
That's why this is the Mother of All Scams"*

No heavy weight myself but the whatsapp message is creating unnecessary FUD. As far as I know, payTM does not charge you if the transfer is from wallet to wallet i.e. you buy something from Seller A and pay X to his payTM wallet, it does not cost any money. So the Seller A can use that wallet money and pay via PayTM to say Service Provider B without any transaction costs. So long as that money remains with the wallet (i.e. with PayTM), there will be no transaction costs.

Now if Seller tries to move that money into an account, then PayTM will charge 1 % or 4% depending on KYC compliance or not. For registered business with PayTM which is KYC compliant, there are no transaction charges but there will be fees for the service (which you would pay a Bank as well!). Please check this answer on quora with further links to PaxTM site if you want to go through the details. Secondly, if the user uses UPI based apps, as far as I know there are no transaction charges currently but may be added in the future. Please see this link. My take is that for the usual small value cash transactions, charges will be quite low which will also force the credit card companies to reduce their charges. For legal high value transactions, even today we end up paying fees (e.g. in case of Demand Drafts) . Ultimately, if we go beyond all the rhetoric, every body understands that small value transactions will likely remain in cash but with e-wallets, we have a much more convenient option in hand. For large value legal transactions, why do you need cash????

Rampy · Post by **Rampy** » 15 Dec 2016 10:49

Pratyush wrote:
GopiD wrote:Suraj sir and other heavy weights here, help me answer the below question please. Its from WhatsApp.

Q : What's wrong with Cashless Transaction?
A:
Quote * Sir think that a 100 rupee note is circulated 1,00,000 times it will have the same value no body get any commission.

But, if it is circulated through cashless way each transaction fetches 2.5% commission that means 1,00,000 times 2.5% = 2500% i.e. Rs. 2,50,000 (Rs. Two Lakhs fifty thousand Rupees) to service providers like Paytm or Jio Money etc. Just for hundred rupees.

So, it's a perpetual golden egg laying goose gifted to the gang.
That's why this is the Mother of All Scams"*

Cash in pocket has no value, we are assuming that people will take money and immediately use it for another transaction, but thats not true. You may provide 2,50,000 in commission but at 6% interest the same 100 rs will earn 600000 in interest in bank. Now what is better?

prahaar · Post by **prahaar** » 15 Dec 2016 11:23

Rampyji true. But until the time when it is not guaranteed that the required goods and services will be available via cashless, people will have to maintain both. And this causes those not already into cashless, complain about. In places where cashless is norm, I end up using less than 10$ in months, overall. We are far from such POS penetration.

RajeshG · Post by **RajeshG** » 15 Dec 2016 11:39

GopiD wrote:Q : What's wrong with Cashless Transaction?

This question and its answer makes an assumption that all humans are selfish.

When a selfish merchant is facing a 1% charge on all transactions then he/she will pass it on to consumers resulting in 1% price rise. Then a selfish consumer with cash on hand will demand a 1% discount because the selfish customer knows that the selfish merchant isnt paying 1% (and possibly even a few more % on taxes). Obscure arguments like two phase commits, big-data, iops and ec2 clusters will not make any sense to a person making a sale of 100rs or a person who is spending that amount. Both selfish merchant and selfish customer is interested in the answer to very simple question "yaar what is in it for me only ?".

Anyhow there is some debate about MDR in govt circles as well. A lot will depend on the outcome.

RajeshG wrote:http://economictimes.indiatimes.com/new ... 930134.cms

“Mr Gandhi said that any reduction in charge has to be done keeping in mind the cost considerations for banks. The government is keen to significantly lower charges for transactions below Rs 1,000 and Rs 2,000 where charges vary from 75 to 100 basis points,” a person familiar with discussions told ET.

Experts in payments business say that lowering debit card MDR aggressively may hold back banks from rolling out point of sale (PoS) terminals – electronic devices which are used by retailers to process card payments; also, a nominal or zero charge on debit cards could make many merchants reluctant to accept credit cards where the MDR is around an average of 170 basis points.

RajeshG · Post by **RajeshG** » 15 Dec 2016 11:43

Rampy wrote:Cash in pocket has no value, we are assuming that people will take money and immediately use it for another transaction, but thats not true. You may provide 2,50,000 in commission but at 6% interest the same 100 rs will earn 600000 in interest in bank. Now what is better?

The commission is on each transaction, interest is not. I am not following the logic.

Suraj · Post by **Suraj** » 15 Dec 2016 11:57

Rampy wrote:
Pratyush wrote:
Cash in pocket has no value, we are assuming that people will take money and immediately use it for another transaction, but thats not true. You may provide 2,50,000 in commission but at 6% interest the same 100 rs will earn 600000 in interest in bank. Now what is better?

You're confusing things here. There's no 6% interest gain on each cash transaction. In fact the rate is 0% . You're talking about money deposited in the bank earning 6% interest. Where do you think that 6% comes from ? It comes out of being lent to companies as capital to do business, including PayTM, who charges 2.5% and uses part of that earning to pay the borrowing rate of interest back to the bank, which comes back to you as your 6% interest...

RajeshG · Post by **RajeshG** » 15 Dec 2016 12:03

saumitra_j wrote:As far as I know, payTM does not charge you if the transfer is from wallet to wallet

Interesting.

The fine print..

https://paytm.com/terms

You shall pay the Service Charges prescribed by Paytm in the form and manner prescribed for such payment. Paytm may at its discretion, change, amend, increase, or reduce the Service Charges without prior intimation to the Customer.

Marten · Post by **Marten** » 15 Dec 2016 12:06

shiv wrote:
GopiD wrote:Suraj sir and other heavy weights here, help me answer the below question please. Its from WhatsApp.

Q : What's wrong with Cashless Transaction?
A:
Quote * Sir think that a 100 rupee note is circulated 1,00,000 times it will have the same value no body get any commission.

But, if it is circulated through cashless way each transaction fetches 2.5% commission that means 1,00,000 times 2.5% = 2500% i.e. Rs. 2,50,000 (Rs. Two Lakhs fifty thousand Rupees) to service providers like Paytm or Jio Money etc. Just for hundred rupees.

So, it's a perpetual golden egg laying goose gifted to the gang.
That's why this is the Mother of All Scams"*
Not a heavy wt. But I get 100 note & visit a whore. Whore gets clothes ironed for same note. Ironing lady buys veg with my note. Veg seller buys booze. Booze seller visits same whore

My 100 goes a long way buys several 100 worth services and goods.

I'd like my clothes ironed too - please share the address of the 100 ***re.

iirc, the ideal money multiplier is around 12? That means it rotates once a month, and that's it for all the cash! Question is where does the rest go to hibernate? Do we need demos every five years for money to start changing hands regularly!

GopiD · Post by **GopiD** » 15 Dec 2016 12:14

Suraj sir and other heavy weights here, help me answer the below question please. Its from WhatsApp.

Q : What's wrong with Cashless Transaction?
A: Quote * Sir think that a 100 rupee note is circulated 1,00,000 times it will have the same value no body get any commission.

But, if it is circulated through cashless way each transaction fetches 2.5% commission that means 1,00,000 times 2.5% = 2500% i.e. Rs. 2,50,000 (Rs. Two Lakhs fifty thousand Rupees) to service providers like Paytm or Jio Money etc. Just for hundred rupees.

So, it's a perpetual golden egg laying goose gifted to the gang.
That's why this is the Mother of All Scams"*

Thanks all for the great replies. I am completely pro Demonetisation and I am convinced it is for our greater good. This question was passed onto me through a friend who is a nationalist and needed help answering it to a wider group of people.

I understand this question as,
"Cash is convenient for me and as an individual I don't pay any transaction charge when I use cash (don't care what the overhead costs for cash are). But, by going cashless, I am being burdened with transaction charges. Why should I go cashless and help some organizations get rich? And is there a deal between these organizations and Modi, who has opened such a large potential market to some organizations?"

The question essentially is about the transaction costs that the end-user needs to bear. The government was able to sell the demonetisation idea as a national security issue (FICN and terrorism funding) and anti-black money step. Now the narrative is being changed to "what about the transaction costs?" "What about all the money that the big corporations are going to make, which we are going to pay?" etc.

I think these questions need a multi-pronged answers
1. Answers pointing towards how to reduce the transaction fee/alternatives while going cashless.
2. Answers pointing to pros of demonetisation and how its going to be a step towards the greater good of the people.

The answers to the above question can be spread far and wide on whatsapp and would help in rebutting the new narrative being set. I am compiling an rebuttal from all the above replies, but would more info with the above 2 points.

P.s. Suraj sir, that was the line I took when I answered the question to an individual. But, I think this needs a better answer to blunt the thrust. JMT.

Thanks again

Suraj · Post by **Suraj** » 15 Dec 2016 12:49

Please don't keep calling me sir. I'm probably younger than you

Sachin · Post by **Sachin** » 15 Dec 2016 12:51

chetak wrote: rumor is that pappu has got his hands on some Modi adani(?) recorded conversation that happened a few days before demonetization.

Well, may be to counter that news is out that in a diary it was written that crores were paid to to a "political family" in India, to get the Augusta-Westland deal. Pappu & co may be called in for fire-fighting there. Parliament session,I feel is only going to be there for another few days.

disha wrote:Two: After the political party launders the money., simple accounting will paint a huge target on its back by ECI., all political parties have to provide to the ECI expenditure reports and I believe it has to be certified by CA.

And they being political party would also find it embarassing if their accounts show a sudden rise in the donations, and they unable to clearly tell who provided that money. For it is known that now money-bag would suddenly like the party idelaogy after November 2016, and starts giving huge donations. Off course, this also would impact BJP as a political party.

For example you are a sarkaari babu from octroi with say 10 Cr. Rs. in demonetized notes. You approach the CONgoons and ask them to launder 10 Cr. Rs. First this will expose you to them for future ransom. But for now., they say yes they will return say 8 Cr. Rs in new notes to you.

This is only possible if the CONgoons themselves have 8 crore in their currency chest. How can they get so much new notes, with no paper trail?? That question itself would make them land in hot soup. And worse, if they did have such money and using serial numbers the IT folks know that the black money holder got the funds from a CONgoon currency chest then that would be even more fun.

ManuJ wrote:Have heard from the horse's mouth that a lot of old denomination money is being laundered through the farming loophole.

What is Agricultural Income and is it Taxable in India?
I found the above web site to give clear information on this. And yes, you are right "farming income" seems to be absolutely tax-free. The clause I found most interesting was - "If we suffer losses in agriculture these losses can be set off against the agricultural profits for the next 8 years.". So even a sudden rise in profit can be easily explained out ("I got a good crop this time, last 8 years I was ruined"). The only way for the central government to over come this would be to perhaps go through the land holding records, and to see if they actually did farming in that land. I don't think the Tax Act just allows any one to declare any figure of money as "farming income" and then just walk away.

GopiD wrote:"Cash is convenient for me and as an individual I don't pay any transaction charge when I use cash (don't care what the overhead costs for cash are). But, by going cashless, I am being burdened with transaction charges. Why should I go cashless and help some organizations get rich? And is there a deal between these organizations and Modi, who has opened such a large potential market to some organizations?"

Not an expert. But my gut feeling on this is that, people using PayTM etc. to pay paltry sums (like below Rs.500) would stop doing it, once the new notes gets popularised and is available in the right numbers. But for the higher valued transaction, people would find it more convenient to use PayTM, E-Wallet, Net banking etc. And for that value, a small percentage as a bank commission would not cost much (compared to the quick benefits). Going forward high value currency may not be available in the same %-age which existed earlier. So give it 3-4 months, cash transactions would still be there but for smaller value purchases. And the people who take the currency would also find it tough to hoard it, as it is a waste to hoard money using Rs.10,20,50 & Rs100 notes. They would go and deposit it in a bank.

Rishi Verma · Post by **Rishi Verma** » 15 Dec 2016 14:38

Axis Bank-Noida, 60cr in Fake Accounts

Sources said systematic deposits were made into these accounts that had been opened in the names of low-income workers and labourers.

The accounts came to the notice of the I-T department when a jeweller in Noida sold gold worth Rs 600 crores after the November 8 demonetisation announcement, and deposited the money he got at the Noida branch.

ragupta · Post by **ragupta** » 15 Dec 2016 15:08

cash v/s cashless
relatively pros and cons
cash: all the existing problem - corruption, black money, robbery, theft, cheating, manipulation, undermining formal economy, tax evasion, inflation, hoarding, complicated litigation, fake, transport cost, printing cost, inconvenience cost, untraceability cost, parallel economy cost, less money in formal economy mean less infrastructure development that infrastructure cost, loss in terms of GDP (country valuation cost), resulting in coatic development etc)

Less-Cash: reduces above, plus growth, faster development, employment, knowledge economy, more money for infrastructure, weakening the negative forces undermining system

ragupta · Post by **ragupta** » 15 Dec 2016 16:32

Demonetisation biggest scam of the year, cashless economy is an excuse to justify move: P Chidambaram

http://economictimes.indiatimes.com/new ... 954514.cms

P Chidambaram is the biggest crook and gaddar a country can have.
I have been following his statements since India's Nuclear test.
He said "India has shot in his foot"

Since then I have not seen him supporting any good policy in India. His conduct is nothing short of a foreign mole. I am sure he was recruited when he was at Harvard.
It is unfortunate that such kind of people held high position of finance minister and home minister.
As home minister he tried to implicate Modi and supported terrorists.
He had looted Indian public money and his son is enjoying stay in Singapore and investing in real estate there.
I am sure he is involved in money laundering his own and congress money.

He is using his Harvard education to loot the system and act against country interest.

If I would be in any govt, I would thoroughly investigate his conduct for last 15-20 years.
he is smart but there would certainly be some trail to find his misdeeds.

Mukesh.Kumar · Post by **Mukesh.Kumar** » 15 Dec 2016 16:35

Poll on Tracking Sentiment across Country due to De-Mo. Tracking till End January 2017

X-Posting

Mukesh.Kumar wrote:Dear Admins/ Fellow BRFites,
You can rate the sentiment that you feel (on ground, in media, social media) and rate on a score of 5 to 1. Daily will be taking a snapshot of votes polled between 2300 hrs and 2400 hrs IST. This may not be the perfect method as most of us in BRF are slightly pro De-Mo, but at least provide a rough metric over time on how mood changes. Something akin to our GJP during elections 2014.

In case anyone feels that between two days they have changed their mood, then they can add a comment to why they chenged their opinion. Verbatim descriptions of anecdotes would make this very rich.

Manish_P · Post by **Manish_P** » 15 Dec 2016 16:59

Cash-less would definetly be better IMHO

But i would like it to be made more secure in general and less cumbersome during filing of returns

1) Security needs to be further strengthend

My brother has a credit card of one the top private indian banks. With 3d secure alert set. In addition he uses mainly the OTP way when doing online transactions

Some 3 weeks back at around 2 AM he starts getting about a dozen SMSs one after the other about his card being used for online transactions in Russia, the baltic states, spain and eastern europe.

In a panic he dials the helpline of the bank only to realise that it's 4 AM and they do not have round the clock support. He then starts his laptop, logs in to the internet (luckily he has a broad band connection and is in a metro city), tries to log in to his net banking only to get a message that the account login itself has been blocked. In a total panic wonders what to do next (go to the cops?) but then realises that the SMS's have stopped.

Waits till the morning (no intimation from the bank). Calls the bank support and is informed that his card has been hacked and hence blocked by the bank. He says that's great but why block his netbanking only to get a vague reply about security and how he will be sent a new password (by courier) in 48 hours. He does get the new password in 3 days leading him to immediately log in and see if there is any further damage (bank sends SMS alert for minimum of Rs 5000 withdrawals). Get's a new card in 7 days. No explanations about how and where the card was compromised.

For 3 days he was not able to do anything with his net banking and was without a credit card for 7.

2) Must be made less cumbersome (or more user friendly)

This is just based on a personal experience. Not really a huge problem for me per se but might be for others.

I have been using online (cash less) payment methods for over a decade now. About 10-15 years back it was just to pay for the essential services (Electricity, Landline, Gas etc). The yearly tax returns filing were way easier to file as the number of bank transactions were low.

About 5 years ago i started to use cash less payment for more and more things (online shopping, train tickets, entertainment, dining out etc). Now the yearly bank statement runs into tens of pages. Luckily for me i am well versed in spreadsheets. So i just download the yearly statement in an MS excel format and use filters on the column of deposits, then further filters (some use the word 'Interest', some use 'Int') on which credits are taxable, which are already tax deducted and so on.

Going further i think perhaps almost 80%-90% of my transactions will be happening in a digital way, my excel file will be huge and i will have to be even more careful. Others who are not so conversant with spreadsheets will need to bring themselves up to speed or will have to depend on external help (family, friends,CA's etc) leading to other concerns

shiv · Post by **shiv** » 15 Dec 2016 17:07

GopiD wrote:
I think these questions need a multi-pronged answers
1. Answers pointing towards how to reduce the transaction fee/alternatives while going cashless.
2. Answers pointing to pros of demonetisation and how its going to be a step towards the greater good of the people.

I will state my view using (partly) my earlier analogy which was typed in a hurry on a bus on phone.

Sorry - it requires some explanation - it will be longish. will try and make it slightly funny

I have no answer about how to reduce transaction fees.

But this is how I see cash (as in Rupee notes and coins).

They actually mean nothing. It is technically a piece of paper or metal which has value only because the RBI says that it has X value. This value of the Rupee - "X" is determined by how much anyone in the world wants it. It is currently pegged against the dollar - but in the past currencies have been pegged against the value of gold.

I am no economist or CA but this is what I think I know. Suppose India was a country that offered services that everyone wants - say we were producing the world's most desirable prostitutes (male/female/ac-dc) and everyone in the world wanted a bit. There would be much demand for these people. Now because demand is very high - with tens of millions of people coming to India to enjoy the prostitutes there would be plenty of customers willing to pay - and because demand would be high each prostitute could raise his/her price. Now we have customers from all over the world - some pay in pesos - some pay in dolahs and some pay in wampum. All this money is useless - the prostitute cannot buy even toothpaste in the local shop - so all these foreign currencies would be converted to Rupees, which can be used in India. And because people are bringing lots of money - the Rupee is also in high demand and has high value. People pay a lot of their own currency to buy a few Rupees and then the pay a lot of Rupees to get what they want.

But let us remember that the Rupee is only a promise "to pay some value" That value is now very high because of the high demand for Rupees driven by our world beating prostitution. Now using the Rupee (by prostitutes, hotels, brothels and people who sell toothpaste to prostitutes) is only an agreement we have with our nation. In fact anyone could say "Screw the Rupee". One prostitute may take payment as one washing machine one day. The next day she would take one TV set. etc. But still the customer would have to buy those things to give as payment and he would be forced to use the Rupee.

So what is the government's role in all this? The government is printing the Rupee and giving some value to that Rupee based on the great demand for Rupees to pay our valuable prostitutes. The government also has a role in ensuring security - like streets to go to brothels, security so criminal customers don't screw and bolt. The government also needs some money to maintain law and order, power, water supply and roads. The government cannot pay road builders and electric suppliers in washing machines and TV sets. It has to be money. So the government also must have some Rupees.

How does the government get Rupees? The government gets Rupees in the form of tax. The government provides power and water to the brothels and builds roads and takes Rupees as payment (tax) from the prostitutes.

Now let us take a situation where the prostitutes hoard Rupees and do not pay tax. What does the government do? It does not have money to do its job. There are two ways forward
1. Crack down on whores not paying tax
2. Print more Rupees.

Both courses end up being bad. Let me explain

Suppose the Govt starts cracking down on non taxpayers. Then some people will tell the prostitutes - "Look screw the government. We will make your roads and look after your security. You simply pay us" This sets up a parallel government where only the interests of rich working prostitutes are looked after. Older ones and their children are useless and they will get poorer. Some of them will be forced to reduce prices - and that will make prostitution cheaper for customers and the value of the service will fall ultimately affecting the successful prostitutes also

In the meantime the government has no money. So they print more money. Now there are more and more and more Rupees freely available. Foreign customers will find Rupees easy to buy because there are so many notes. They will still pay the prostitutes high fees but since Rupees are cheap and easy to buy they are getting "More bang for the buck" (or more f*ck per buck)

So a cash economy where the government prints the money but can be cheated easily is what India has been

How will electronic cash help. Electronic cash can be tracked. Every transaction can be tracked. That allows people to get paid and the government can also get its due. Prostitutes get paid for their service; drivers get paid for their service, waiters get paid for their service and electronics service providers will also get paid. The idea that 2.5% is taken in electronic transactions and therefore money is multiplying is a form of saying "I want a service but I don't want to pay for it. I want whatever I can gain but I do not want anyone else to gain"

That is far easier to do with cash than with e money. E cash is the way to go

Sorry the post was long..