Currency Demonetisation and Future course of Indian Economy

MurthyB · Post by **MurthyB** » 20 Dec 2016 01:14

So yesterdin I asked my mother in Mysuru how she was coping with the demo thing. A senior citizen with 0 electronic or mobile based life, she is as traditional as they come with respect to banking. Also a lifelong Cong supporter with no love lost for anyone else. I asked her about lines and she laughed--yes of course lot of lines. How long did she have to stand? At least half-a-hour to 45 minutes she said. She's done this 2-3 times. Could deposit all the miscellaneous cash she had on hand. Clearly, urban folks haven't had it too bad methinks...

KLNMurthy · Post by **KLNMurthy** » 20 Dec 2016 01:20

Suraj wrote: ...
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 .

Let me share an anecdote.

Long back when it was still the done thing to take electronics as gifts when visiting family in India, I went to an Indian-owned appliance store in US and tried to purchase some electronic item or the other. The store guy quoted a certain price, and naturally I tried to bargain for a substantially lower price. Even after the guy came down a bit in his price, I, being a good Indian, kept at it, telling him, "come on, you can give me the item for $xxx". So the guy said to me, very nicely, saar, if this was an American store you would have simply paid the quoted price and gone your way; here we don't make that much money, but just because we are an Indian store, you think we make as little money as possible. The transaction ended with me accepting the guy's price and making the purchase.

Now that may well have been a sales ploy by the storewallah, but his point stands. Those of us who live outside the motherland routinely pay any amount of "convenience fees", surcharges, "checking account fees" and so on without a murmur, though we may resent it. But our grievance apparently rises to a different level when a fellow Indian (that too India-based one) sets up almost the same kind of scheme to make (or maybe "milk") money. We have different standards for "whites" (generic master-race type foreigners) and for ourselves.

That doesn't necessarily make us hypocrites or bad people--we are just better able to identify with the "Indian" aspect of the businessman, and as non-businessmen, may be thinking, here is a "magic" way of making money that doesn't feel quite ethical as it doesn't involve literally slogging for every rupee. But maybe we are failing to identify with the "businessman" element of the "Indian businessman"--a business has to make money to survive and grow and provide employment and all-around prosperity. There should be checks and balances for ethical conduct of business but making money from commission is not, in itself unethical. (Even "Islamic" banking allows it, couched as a "partnership" in the transaction

)

hanumadu · Post by **hanumadu** » 20 Dec 2016 01:47

I think Alibaba has 25% stake in Paytm. The rest is with Indians only?? Its not a big worry if Paytm is majority owned by foreigners. Some of our biggest companies are. As the market for digital payments grows, there will be more start ups competing with Paytm. If there is a better alternative to Paytm use it, otherwise we should not hesitate to use Paytm.

KLNMurthy · Post by **KLNMurthy** » 20 Dec 2016 03:10

Thanks for the info on paytm hanumadu garu.

Sorry to keep bugging this forum with my personal questions but I have another one.

For the past several visits from US to Hyderabad I have been keeping upwards of 1L in cash with me. I know it is against RBI rules, but I needed the cash handy for family reasons which left me with no time to get situated after landing in Hyderabad.

So far, I never had any questions or issues with customs in Hyderabad. Now, with demonetization, has anyone experienced any change in inspection and enforcement of currency rules at Hyderabad airport?

Thanks again.

rajkumar · Post by **rajkumar** » 20 Dec 2016 04:15

No change at HYD airport. SHQ transited yesterday and no one was stopped. However the ATM's had long queue at HYD and so she couldn't take any out.

Suraj · Post by **Suraj** » 20 Dec 2016 04:57

KLNMurthy wrote:
Suraj wrote: ...
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 .
Now that may well have been a sales ploy by the storewallah, but his point stands. Those of us who live outside the motherland routinely pay any amount of "convenience fees", surcharges, "checking account fees" and so on without a murmur, though we may resent it. But our grievance apparently rises to a different level when a fellow Indian (that too India-based one) sets up almost the same kind of scheme to make (or maybe "milk") money. We have different standards for "whites" (generic master-race type foreigners) and for ourselves.

That doesn't necessarily make us hypocrites or bad people--we are just better able to identify with the "Indian" aspect of the businessman, and as non-businessmen, may be thinking, here is a "magic" way of making money that doesn't feel quite ethical as it doesn't involve literally slogging for every rupee. But maybe we are failing to identify with the "businessman" element of the "Indian businessman"--a business has to make money to survive and grow and provide employment and all-around prosperity. There should be checks and balances for ethical conduct of business but making money from commission is not, in itself unethical. (Even "Islamic" banking allows it, couched as a "partnership" in the transaction )

The original whatsapp meme that was the subject of my response, was even more scurrilous . It didn't merely take issue with a desi service having a convenience fee. It actually termed them a SCAM. In fact it computed the gross revenues to PayTM accruing from an example series of transactions and termed that total a scam. That's not merely an attempt to bargain. It's intentionally mean-spirited, attempting to mis-characterize a valid and useful business as criminal activity.

KLNMurthy · Post by **KLNMurthy** » 20 Dec 2016 05:06

rajkumar wrote:No change at HYD airport. SHQ transited yesterday and no one was stopped. However the ATM's had long queue at HYD and so she couldn't take any out.

Thanks for the data point. I'll certainly try and contribute my experience.

hanumadu · Post by **hanumadu** » 20 Dec 2016 06:32

KLNMurthy wrote:Thanks for the info on paytm hanumadu garu.

Sorry to keep bugging this forum with my personal questions but I have another one.

For the past several visits from US to Hyderabad I have been keeping upwards of 1L in cash with me. I know it is against RBI rules, but I needed the cash handy for family reasons which left me with no time to get situated after landing in Hyderabad.

So far, I never had any questions or issues with customs in Hyderabad. Now, with demonetization, has anyone experienced any change in inspection and enforcement of currency rules at Hyderabad airport?

Thanks again.

https://en.wikipedia.org/wiki/Paytm

In March 2015, Indian industrialist Ratan Tata made personal investment in the firm.[9] The same month, the company received a $575 million investment from Alibaba Group of China ,[10] after Ant Financial Services Group, an Alibaba Group affiliate, took 25% stake in One97 as part of a strategic agreement.[11] Paytm borrowed 300cr from ICICI Bank in March 2016 as working capital.

There are many other investors, mostly foreign looks like. This is the reality. For one or two generations Indian startups will be majorly funded and owned by foreign investment firms. With time, Indian startups will be able to raise capital within India itself.

Singha · Post by **Singha** » 20 Dec 2016 07:29

Customs rules are online. I believe upto $3500 in cash is allowed and upto $7000 in travellers cheques/cash card.

Sicanta · Post by **Sicanta** » 20 Dec 2016 08:03

Govt says less tax for small traders on digital transactions

http://www.business-standard.com/articl ... 626_1.html

Govt seeks help from IT industry for digital payment training

http://www.business-standard.com/articl ... 057_1.html

Fresh curbs on deposits above Rs 5,000

http://www.business-standard.com/articl ... 153_1.html

Trai recommends limited free data for rural subscribers

http://www.business-standard.com/articl ... 833_1.html

chetak · Post by **chetak** » 20 Dec 2016 09:37

India should be suitably contrite, the great havard business review trashes the deMo scheme. Another "Indian" takes pride in running down his country.

It's true that opinions are like assholes, everybody has one.

https://hbr.org/2016/12/indias-botched- ... harvardbiz

Yagnasri · Post by **Yagnasri** » 20 Dec 2016 09:43

TRAI recommendation on free data is good. We can also look at differential or even zero cost for using any of the online payment platforms both by the consumers and also the traders etc. But I guess it raises up greater issues of net neutrality etc.

Paul · Post by **Paul** » 20 Dec 2016 09:44

^^Applies to this thread too. Shows the hypocrisy of the upper middle classes. It is the poor who are carrying the burden of Indian civilization forward.

Rishi Verma · Post by **Rishi Verma** » 20 Dec 2016 10:30

Gov receives 4K email Tip-offs re BM in 3-days

The government's email address for black money tipoffs has been flooded with 4,000 messages since Friday, when blackmoneyinfo@incometax. gov.in was made public. "We are getting a good response," a finance ministry official told ET.

That's in addition to vast amounts of data flowing to tax authorities and other investigative agencies on a daily basis

Pure psychops to raise the BP of the crooks

Shaktimaan · Post by **Shaktimaan** » 20 Dec 2016 11:03

Saars, I remember Jetli ji was telling everyone not to rush to banks, you have till December 30th to deposit cash, etc. And now they're changing the rules on December 20th to say that you have to justify your deposit to 2 bank officials, you can make a deposit larger than Rs.5000 only once until the end of the scheme, etc.

I am a supporter of DeMo but this kind of drastic rule change halfway through the game (when the Finance Minister was telling people its OK to wait) makes me lose confidence in the government and their ability to keep their word.

Hari Seldon · Post by **Hari Seldon** » 20 Dec 2016 11:10

^+1.

All govt announcements should come with a disclaimer in fine print henceforth.

Merril · Post by **Merril** » 20 Dec 2016 11:14

Shaktimaan wrote:Saars, I remember Jetli ji was telling everyone not to rush to banks, you have till December 30th to deposit cash, etc. And now they're changing the rules on December 20th to say that you have to justify your deposit to 2 bank officials, you can make a deposit larger than Rs.5000 only once until the end of the scheme, etc.

I am a supporter of DeMo but this kind of drastic rule change halfway through the game (when the Finance Minister was telling people its OK to wait) makes me lose confidence in the government and their ability to keep their word.

Isn't this a canard? If one were, as you say, waiting for an opportune time to deposit all their old notes (presumably more than 5000), wouldn't this be the first time? And for the first time, there are no questions. Hence, no change for this use case. Honest pooch - what use case could you think of where you are depositing more than INR 5000 twice or more leading, once again presumably, to harassment by Bank Officials/IT department/BJP/Modi/<insert favourite bogeyman here>?

Marten · Post by **Marten** » 20 Dec 2016 11:20

There are no queues to deposit the money. The "OK to wait" was for folks who were worried about standing in lines to DEPOSIT money.
I don't see the reason that it is painful, but that is because I do not have any "old" notes to deposit. Under what circumstances will folks need to do this in two or more rounds?

Nitesh · Post by **Nitesh** » 20 Dec 2016 11:23

Any way for most of the time the old 500 and 1000 notes were in use, don't know how does this effects the poor

darshhan · Post by **darshhan** » 20 Dec 2016 11:25

chetak wrote:India should be suitably contrite, the great havard business review trashes the deMo scheme. Another "Indian" takes pride in running down his country.

It's true that opinions are like assholes, everybody has one.

https://hbr.org/2016/12/indias-botched- ... harvardbiz

+1 and its full of shit.

Sachin · Post by **Sachin** » 20 Dec 2016 11:56

The "poor" farmer who is assumed to be a simpleton, is far more smarter & practical than the so called "educated intelligentsia" giving lectures sitting in TV Studios.
Farmers grow smarter to beat note ban woes
Farmers in Karnataka have taken to trading via the Unified Market Platform (UMP) of Rashtriya e-Market Services (ReMS) easily even as demonetisation has hit business across the country.
....
When demonetisation was announced, farmers, doubting sales and payments, hesitated to bring their produce to the markets, while traders and commission agents did not fully participate in the markets. Trade picked up subsequently. The last week of November has seen an increase of 13% growth over the first week of November. The trade in the current month is around Rs 2,300 crore,” he said.

habal · Post by **habal** » 20 Dec 2016 11:58

NABARD always comes up with new schemes to help genuine small scale and medium scale farmers.

what we lack in India is a cold storage chain that can rent space to farmers to stock produce during harvest season and sell during lean season. I have till now not really understood why GoI in all it's wisdom doesn't implement this.

Pratyush · Post by **Pratyush** » 20 Dec 2016 12:07

Well said habal. That is also a business opportunity for people to start building cold chains. For storage of produce and subsequent release of it in the market.

madhu · Post by **madhu** » 20 Dec 2016 12:14

Demonetisation: Angry Cashless People Attack Banks in Gujarat

People furious over lack of cash in banks on Monday attacked bank branches in two districts of Gujarat, the authorities said.

A mob locked up the State Bank of India and Dena Bank branches in Samadhiyala village in Amreli district in Saurashtra region after hundreds waiting in long queues were told the banks had no cash to give.

Most of the people were farmers, witnesses said.

In Surendranagar district, mobs attacked some bank branches and damaged their doors and windows after they were found to have been kept closed for the third consecutive day since Saturday.

The bank authorities said there was no meaning of opening the branches as no cash had reached the branches on Monday.

In Silvassa, capital of the union territory of Dadra and Nagar Haveli, the manager and some staff members of a nationalized bank were roughed up by people as the bank had no cash to distribute.

The police had to intervene to rescue the bank staff.

habal · Post by **habal** » 20 Dec 2016 12:25

Pratyush wrote:Well said habal. That is also a business opportunity for people to start building cold chains. For storage of produce and subsequent release of it in the market.

During UPA regime I thought that this was a plan to facilitate international cold storage chains into India like Walmart types. So the govt was keeping it's slate clean by not investing in that respect at all and creating conflicts of interest with foreign chains who were to be given preference. hum to hamesha number 2 hee hone chahiye naa, goron ke saamne hamari aukaat kahaan type of thought infesting bureaucratic and political circles. Our entire positioning seemed to be to beg for massa to throw a dime or two this side, and facilitate this whenever it eventually happened. A clown Anand Sharma was minister of agriculture, even writing/talking to him was pointless, such a tool he was for madam and foreign interests. I do not see what Modi's reason for not investing in this sector is.

this sector needs govt investment. If successful lot of 'me-too' privates will follow soon.
this move can really turn around the farming and agricultural sector and boost economy and Modi will be darling of small and medium farmers.

also cold storage chains can be solar powered, so that they are energy efficient.

Subdas · Post by **Subdas** » 20 Dec 2016 12:49

Folks who have read the book "WHO MOVE MY CHEESE" would know that the supposedly lesser mortals are much more flexible and adapts to a disruption than the supposedly elite/smart mortals. No wonder lower sections of the economic strata are adopting digital cash than the elite and upper middle class ones!

RajeshG · Post by **RajeshG** » 20 Dec 2016 12:50

Why is Chakravarti's article full of sh1t ? Can somebody please explain without getting too emotional ? The author seems to be all for cashless economy.

In fact the paper that is linked to in that article seems to be a treasure trove of numbers for those so inclined and is a very interesting read.

http://fletcher.tufts.edu/~/media/Fletc ... lowres.pdf

BTW i have read several articles that UP elections are getting postponed and Guj elections are getting preponed.

Sachin · Post by **Sachin** » 20 Dec 2016 13:03

നോട്ട് പ്രതിസന്ധി: കണ്ണൂരില്‍ വ്യാപാരി ആത്മഹത്യ ചെയ്തു......(Demonitisation: Merchant commits suicide at Kannur) - Mathrubhumi report (in Malayalam)
--
The summary of the news is that a concrete cement merchant who owed lots of money to his distributors, and also had dues from his customers committed suicide stating "paucity of funds". He had mentioned about his poor financial conditions to his friend, before ending his life. The news paper had highlighted that it was the currency crunch which led to the debtors not paying up the debts to the merchant. The merchant was also not able to pay his dues to his distributors. Lot of people have raised the question of why was'nt the facilities like cheques used.

I am now thinking that in Kerala a lots of "business" is now being run using unaccounted money. Perhaps every one may not be doing this dodging taxes, but looks like the state relied too much on "cash based business". I don't know how much %-age is the "cash based business" in other parts of India. At least in Kerala, looks like every one just hoped that the money in circulation is all good money and did not think about "demonetization". Another area which seems to have got impacted is "garment retail business", where cash purchases (and lots of discounts for such purchases) were the norm. The whine of "hard earned money" (but tax dues not paid) being forcibly taken away by the government is also now gaining momentum, and the media (like Mathrubhumi owned by a politician) are also fanning such sentiments. A lot of people have now taken a stand that the government have no rights on imposing restrictions on one using one's own "hard earned money". The stand is a bit comical at times, as the "hard earned" aspect is highlighted to negate the requirement to pay tax dues.

RajeshG · Post by **RajeshG** » 20 Dec 2016 14:14

VIJAYAWADA: Andhra Pradesh Chief Minister N Chandrababu Naidu today said demonetisation was not what they wished for, adding he was still breaking his head as a solution to the ongoing (currency) crisis remained elusive.

"Demonetisation was not our wish but it happened. More than 40 days after demonetisation, there are still a lot of problems but yet there appears to be no solution," Chandrababu said addressing a workshop of Telugu Desam MPs, MLCs, MLAs and other leaders here today. ..

Read more at:
http://economictimes.indiatimes.com/art ... aign=cppst

Vikas · Post by **Vikas** » 20 Dec 2016 14:16

Govt should stick to its stated policy irrespective of my reasons to visit bank twice or 10 times to deposit the notes. So if I goto different banks to deposit my cash, then no one will ask me question since the information about me other visit is still not shared between banks. What a moronic idea by tho Babus of Fin Ministry.
Middle class and upper middle class too is denizen of this country and Govt can not shove everything in the name of helping poor.
Rumor in economic circles is that govt will land up with egg on its face with little black money being unearthed and hardly any big fish being caught hence change of Goalposts now. This was a exercise in turning India into cashless economy in the garb of finding Black money.
Most of the ATM's are still empty most of the times, Hardly any ATM dispenses Rs.100 note, no hope of GST being implemented any time soon and if Govt had to bring in Rs.500 note eventually, then why not do it in the first place instead of idiotic Rs.2000 note which has put everyone in trouble and pain.
In the end how does this drive widen the tax base and make more people pay tax is beyond my understanding for those who never paid any tax will continue to do so.

Chandragupta · Post by **Chandragupta** » 20 Dec 2016 15:21

VikasRaina wrote:Govt should stick to its stated policy irrespective of my reasons to visit bank twice or 10 times to deposit the notes. So if I goto different banks to deposit my cash, then no one will ask me question since the information about me other visit is still not shared between banks. What a moronic idea by tho Babus of Fin Ministry.
Middle class and upper middle class too is denizen of this country and Govt can not shove everything in the name of helping poor.
Rumor in economic circles is that govt will land up with egg on its face with little black money being unearthed and hardly any big fish being caught hence change of Goalposts now. This was a exercise in turning India into cashless economy in the garb of finding Black money.
Most of the ATM's are still empty most of the times, Hardly any ATM dispenses Rs.100 note, no hope of GST being implemented any time soon and if Govt had to bring in Rs.500 note eventually, then why not do it in the first place instead of idiotic Rs.2000 note which has put everyone in trouble and pain.
In the end how does this drive widen the tax base and make more people pay tax is beyond my understanding for those who never paid any tax will continue to do so.

The IT guys are raiding like no tomorrow but they are mostly <1 cr raids. Wonder where the folks with 100s of crores in BM went. Apparently, there are 60,000 accounts where more than 1 cr in 500/1000 notes have been deposited since 8 November. So majorly, I think IT will look at these 60,000 folks - may be all savings or saving + current post December. Without big fishes being caught, the exercise will lose the sheen.

But with IT guys now raiding people with even 10-15 lakhs in new currency, right now it seems that the big fishes have escaped. How else would anyone explain IT guys spending their time raiding for 10 lakh, 15 lakh? If anyone has experience with IT crooks, they don't even spit in the direction of <5 crores, leave alone raiding. There seems to be a diktat from above that raid anyone & everyone.

The U-turns of the GoI are unfortunate. The planning team seems piss poor. They could have hired a team of CAs and they would have given at least a 100 probable ways of laundering BM which could have been countered from the start.

Hope the GoI is planning to completely remove 500 and 2000 notes or anything above 100 from the market. Then alone, you can have a cashless India & widen the tax base. Could happen slowly in 2017.

Sachin · Post by **Sachin** » 20 Dec 2016 15:29

Chandragupta wrote:The IT guys are raiding like no tomorrow but they are mostly <1 cr raids. Wonder where the folks with 100s of crores in BM went. Apparently, there are 60,000 accounts where more than 1 cr in 500/1000 notes have been deposited since 8 November. So majorly, I think IT will look at these 60,000 folks - may be all savings or saving + current post December. Without big fishes being caught, the exercise will lose the sheen.

I think we would have to wait for Dec 31 to "pass over". Most likely only then even GoI would get a realestic picture on the old currency which has come in, the new currency in adequate smaller denominations (and at the quantity/amount which RBI officially wants to be circulated in the market) would just be let out loose. I would like to believe that the RBI is doing their calculations on a daily basis, and the notes are getting printed based on that. But they are on purpose not released to the market.

On the black money front, I feel that a good chunk of it has got "laundered" during the exchange cycle. At that time, I don't think so the banks were able to track of all the exchanges and who did them. The volume was really too large. So people who knew that they are really in for trouble, would have tried to make an escape using gold purchase, or by using sources in bank currency chest and RBI. The next set, who may not be as smart as the first lot (or do not have so much contacts), I feel has parked the money in co-operative banks etc., which at that point of time they felt to be a safe place. And the last set; who did not have any choice (or guts) may have deposited the money en-masse and waiting for the tax men to come and ask them to pay up. I feel we may get a much more clearer picture when co.operative bank audits are also complete and they also start complying with KYC norms etc.

Again I would like to believe that more than Govt. making "U Turns" they are just re-calibrating their strategy. If they kind of chickened out and called of the move, then I feel it is a U turn. If we start accusing govt. of making "U turns" for this, I really am scared if this nation has to go on a war. Every general, defense minister and prime minister would have to vet their plans and get approval of media barons, intellectuals and opposition. Finally they may even have to get a "sign off" on the plan right from the enemy. And then if the plan fails, again the blame lies with the govt. and the generals

.

Chandragupta · Post by **Chandragupta** » 20 Dec 2016 15:40

Yes, not U-turns, that's not the right word but they seem to be absolutely off with the plans. I really feel that they could have assembled a team of 20 well read CAs and they could have compiled a list of 100 best ways to launder BM and the government could have shut at least 50% of them. It is the CAs who deal with sort of thing daily and know every loop that exists in the system.

Dilbu · Post by **Dilbu** » 20 Dec 2016 15:50

I am terribly disappointed with the fact that the cooperative bank loophole was not spotted until this exercise was launched. May be there was no way to do anything in advance without alerting the crooks but thousands of crores getting deposited as back dated FDs before the whole cooperative sector was frozen as a last resort speaks volumes about the surprise RBI had from this quarter. Me no likey.

Yagnasri · Post by **Yagnasri** » 20 Dec 2016 15:59

There are many such things. People used petrol bunks, liquor shops etc. Normaly traders tax evasion is one thing but terror, criminal and politico money is another. We have see what happened to those three kinds of looters.

sum · Post by **sum** » 20 Dec 2016 16:00

I really feel that they could have assembled a team of 20 well read CAs and they could have compiled a list of 100 best ways to launder BM and the government could have shut at least 50% of them. It is the CAs who deal with sort of thing daily and know every loop that exists in the system.

Saar, do you really believe any half compotent govt(leave alone the NaMo led one) would not have thought of this and done this when a ordinary mango-man like me is able to make this out?

The guys sitting at the top of RBI and in the NITI-Aayog/"Thinktanks" which organised this move are "baap" of the CAs and know inside-out of all these tactics.

Its just that "All best laid plans only survive until the first contact with enemy". Am sure many many stories about the unique and strange circumstances and challenges faced will come out in the days to come once dust settles.

pankajs · Post by **pankajs** » 20 Dec 2016 16:05

Dilbu wrote:I am terribly disappointed with the fact that the cooperative bank loophole was not spotted until this exercise was launched. May be there was no way to do anything in advance without alerting the crooks but thousands of crores getting deposited as back dated FDs before the whole cooperative sector was frozen as a last resort speaks volumes about the surprise RBI had from this quarter. Me no likey.

Bhell ... that money is locked now into the FDs. When the time for get back the money comes the GOI will ask for the KYC/PAN else the FD stays locked. Eazzzzy! and it has already happened with another loophole. Backdating means nothing.

A while back I speculated that the co-op accounts without KYC will get locked after Dec 2016. Guess what, all such accounts in ALL banks, not just co-ops, have been locked pending KYC/PAN.

That was an easy guess given the initial miss of co-op loophole. GOI showed that it was thinking and correcting. The same will happen for FDs.

Sachin · Post by **Sachin** » 20 Dec 2016 16:18

Dilbu wrote:I am terribly disappointed with the fact that the cooperative bank loophole was not spotted until this exercise was launched. May be there was no way to do anything in advance without alerting the crooks but thousands of crores getting deposited as back dated FDs before the whole cooperative sector was frozen as a last resort speaks volumes about the surprise RBI had from this quarter.

My thoughts are diametrically opposite yours

. As I see it, the people who have landed in the hottest soup seems to be the big-wigs who used co-operative banks to safe keep their money. The district co.op banks were given a chance to "exchange" money in the first few days; and I am a bit skeptic of that move. Because the co.op banks would have used all their low denomination notes to launder the money brought in by their black money champion customers. But these district co.op banks have NOT got any major stock of new currency. By the time the Rs.2000 notes came in aplenty, the district co.op banks were stopped from doing "exchange". This itself caused hard ship in the co.op banks. They gave away all their small denomination notes, and their sponsor banks (PSU banks) are not giving them any new currency.

Now the PSU sponsor banks would start giving new valid currency banks to the district co.op banks, but only based on the amount for which they can also show KYC information. That is when we also came to know that even in all district co.op banks there are deposits for which no KYC is given (Rs.1080 crores in Kerala alone, Maharashtra is still there). The district co.op banks and primary co.operative socities can take any amount as back dated FDs. Those all would go into proper accounts. But the sponsor banks would only replenish these banks with new notes based on the accounts with KYC information. So if a primary co.op society took in say 1 crore as back dated FDs, it still has to be accounted and for that money to be given back as new valid notes, the bank would have to show the KYC of all account holders. As I write this primary co.ops in Calicut etc. are now running behind account holders for KYC. So all this gives me a feeling that some body who really has his goose cooked are the ones who used the co.operative banks to hoard money.

Yagnasri · Post by **Yagnasri** » 20 Dec 2016 16:20

They might have the end game for this planned in advance. KYC checks are going to be huge when it comes to withdrawals. All GOI need to do is to ensure that people withdrawal limits stay and keep the cash available and then look into accounts where in cash was deposited.

First, let us see how much is lost as it could not be deposited in the banks. SBI people are predicting 2.5 Lakhs.

Sachin · Post by **Sachin** » 20 Dec 2016 16:25

Yagnasri wrote:All GOI need to do is to ensure that people withdrawal limits stay and keep the cash available and then look into accounts where in cash was deposited.

What GOI could do is to identify all accounts which were KYC compliant for a long time (say a year), get pretty much all banking facilities restored. With drawal limits become higher, quicker etc. This itself would release the pressure on a large group of people like salaried folks, as their troubles are pretty much over. The ones which has suspicious KYCs can have more restrictions on with drawals etc. And accounts which don't have any KYCs should get locked up. But that would also lead to a massive rush to banks. It is only a few banks (like CitiBank, HDFC) have provisions for online upload of KYC documents.

First, let us see how much is lost as it could not be deposited in the banks. SBI people are predicting 2.5 Lakhs.

Lakh crores, is what you meant, right?

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