Major gainer will be RBI financially , more than BJP politically
New Delhi: The demonetisation scheme may not help Prime Minister Narendra Modi earn political mileage, it may not also help unearth black-money to the desired level, but it will certainly help the Reserve Bank of India (RBI). It will receive a windfall at the end of the year.
High denomination currency notes of Rs 500 and Rs 1000 which have printed by the bank and which have been withdrawn total around Rs 15 lakh crores. It is estimated that 15 to 20 per cent of these notes will not be exchanged and will go out of circulation. It means that the bank will have no liability to pay around Rs three lakh crores which will be a big bonanza to it. Each of these notes carry promise to pay the amount printed on the note by the bank.
Commercial banks too hoped to gain from this move and raise the interest rates on term deposits but their hope has been dashed to the ground because the reserve bank has raised the Cash Reserve Ratio or the CRR. They are also unlikely to hike the saving interest rate for the same reason.
Their case is completely different from the RBI as it is these banks which have suffered the most, besides customers, from the new move. They had to work overtime to pay cash to their clients, had often to face their wrath for delay in payment and, now, they face the challenge of paying salaries to government employees. The task is enormous in view of the cash crunch.
Banks in rural areas will have to bear the brunt more because of transportation bottleneck. The government has decided to use helicopters to make cash available in the rural areas but the task is not so easy because of the size of the nation. So far no bank branch has reported any case of major violence because of cash shortage but the situation may go out of hand if remedial measures are not taken soon.
There has been no general agreement over the period by which the situation may become normal. The majority view is that it will at least take a fortnight. What is heartening to note is that by and large the people are supportive of the move and there is no sign of restlessness . They may bear with the government till the end of December, the time demanded by it for restoring normalcy.
The people, it seems, are patient because they see a larger goal-- to curb black-money and to transform the society to less-cash society. Total change to cashless economy is not achievable but use of cash can be cut down to a considerable extent. The percentage of cash use is reported to be lowest in Sweden-- only 15 per cent. All other countries have percentage ranging from 15 to 60.
Several companies in India have joined hands with the government to achieve this goal. More and more establishments are installing swipe machines and other gadgets. Change may be effected sooner in urban areas but it will take time to shift to new technology in the countryside. Village panchayats are being roped in to expedite the change.