Saturday, December 31, 2016

Happy New Year 2017

Wish you a very happy and prosperous New Year!

Tuesday, December 6, 2016

Jayalalithaa Passed Away

The Tamil Nadu Chief Minister J Jayalalithaa, popularly known as Amma, passed away on 5 December 2016 at 11:30 pm at the Apollo Hospital, Chennai. The death followed a cardiac arrest she suffered on Sunday night.

The 68-year-old leader was buried in the presence of tens of thousands of mourners, with full state honors at Marina beach, Chennai, next to the memorial of her mentor and former chief minister Dr M G Ramachandran.

Her mortal remains were brought to her residence in Poes Garden on at 6 am Tuesday. She was draped in the Tricolor, the Indian national flag, and encased in a glass casket and placed at the Rajaji Hall for the grieving people to pay their tributes.

The nation is mourning the death of Amma along with the people of Tamil Nadu. The Tamil Nadu government has declared state mourning for seven days. Holidays have been declared by various state governments across India.

Life in Chennai and the rest of Tamil Nadu came to a standstill when news of her death spread with shops, educational institutions and offices remaining closed. The national flag was lowered half mast across India.

Several prominent leaders from all walks of life visited Rajaji Hall to pay their tributes to the departed leader, including President Pranab Mukherjee and Prime Minister Narendra Modi.

Meanwhile, O Panneerselvam, who has been the acting Chief Minister since Jayalalithaa was admitted to Apollo Hospital on September 22, was sworn in as the Chief Minister of the state.

Sunday, December 4, 2016

Demonetisation to Derail Electoral Fortunes

Five Indian states are going to polls to elect their respective state legislature members in early 2017. The Election Commission of India is expected to announce the poll dates as soon as publishing the revised electoral rolls expected latest by January 15, 2017. The states going to polls are Uttar Pradesh (UP), Punjab, Uttarakhand, Manipur and Goa.

Elections in India are notorious for what is known as ‘buying of votes’ or ‘cash for votes’ practiced by some candidates and/or their political parties. The maximum limits of election expenditure for parliamentary and assembly constituencies have been prescribed by the election commission.

And it varies from state to state and it may vary from one election to the next election. For instance, the current maximum limit for small states like Goa and Manipur is Rs 8 lakh, and for a large state like UP, it is Rs 16 lakh. But, based on what was reported by news agencies during the previous elections, several candidates were spending in crores.

Where does all this money come from? Of course, it is an open secret that overspending depends on black money, which is amassed through corruption and other illegal practices.

In the past elections, liquor and cash were distributed liberally and openly to voters. All kinds of freebies, including electronic gadgets, clothing items such as saris, etc. were also distributed. These practices are also illegal. It is common sense that legally earned money cannot be spent in such ways.

One of the fallouts of demonetisation of high value Indian currency could be a substantial reduction in illegal election funding and spending. It is not that all candidates are corrupt. It is also not to claim that black money has been wiped out.

As news reports show, several people might have found ingenious ways to convert black money into white. That means cash for vote may still be at play in the coming elections, though the recent demonetisation drive might have dried up a substantial portion of unaccounted money that is usually hoarded in high value currency notes.

The Five States Going to Polls

The most populated state Uttar Pradesh will go to polls to elect 403 lawmakers for the Vidhan Sabha. The incumbent CM Akhilesh Yadav is seeking reelection of his Samajwadi Party (SP). His main rivals are the former CM Mayawati’s Bahujan Samaj Party (BSP), Bharatiya Janata Party (BJP), and the Indian National Congress (INC).

Punjab will go to polls to elect 117 members of the state Legislative Assembly. The ruling Shiromani Akali Dal (SAD)-BJP alliance, led by CM Parkash Singh Badal, may face tough competition from the Aam Aadmi Party (AAP), INC and BSP. Aawaaz-e-Punjab, a new party formed by Navjot Singh Siddhu and others, is expected to be in the fray independently, or in alliance with other parties.

In Goa, election will be held to elect 40 members of the state Legislative Assembly. The current CM Laxmikant Parsekar of the BJP is seeking reelection. The main rivals are the Congress (INC), Maharashtrawadi Gomantak Party (MGP) and Aam Aadmi Party (AAP).

Election will be held for 70 seats of the Vidhan Sabha in Uttarakhand. CM Harish Rawat and his party, the Congress, mainly face a tough challenge from the BJP. The Congress and BJP have ruled the state alternatively.

Election will be held in Manipur to elect 60 members of the state Legislative Assembly. The incumbent CM Okram Ibobi Singh is facing the main contenders BJP and the Trinamool Congress led by the West Bengal CM Mamata Banerjee.

Friday, December 2, 2016

No Black Money in India?

Here is a shocking possibility that there may be no black money hoarded in India. At least, that is what two reports seek to show convincingly, quoting government’s own data.

The IANS Story

According to an IANS story published by the Indian Express, the government may have a rude shock to find that there is no or negligible amount of black money hoarded in India. At least, that may be the outcome the data as on 30 Dec 2016 can reveal. Here goes the story.

According to various estimates, black money was pegged at amounts ranging from Rs 3 lakh to Rs 5 lakh crore. On Nov 8, the value of Rs 500 and Rs 1000 notes in circulation was Rs 15.44 lakh crore. Out of this, as of Nov 28, the RBI said, Rs 8.45 lakh crore was deposited between Nov 10 and Nov 27 (banks were closed on Nov 9).

Commercial banks are required to keep a cash reserve ratio (CRR) @ 4% with the RBI. On Nov 8, CRR was about Rs 4.06 lakh crore, deposited mostly in high value notes. The cash-to-deposit ratio is 4.69%, which leaves 0.69% with the banks as cash in hand, which works out to approx Rs 70,000 crore.

The sum of CRR and cash deposited in 20 days is approx Rs 12.50 lakh crore. If you add Rs 50,000 crore from cash in hand, the total amount of high value notes not with the public works out to Rs 13 lakh crore.

At rate at which old notes are deposited or exchanged since Nov 8, Rs 2 lakh crore or more can come to the banks in till Dec 30, taking the total to above Rs 15 lakh crore, “thus throwing to the winds all calculation of the government to tackle black money”.

This report says, “Either the black money is not in high denomination notes or those who have such money may already have put it back into the banking system”.

The Wire Report, Quoting Economist Arun Kumar

Economist Arun Kumar estimates that over 95% of the old high value notes may come back to the banking system. The government had estimated that up to Rs 3 lakh crore of these notes may not come back into the system.

As of Dec 1 2016, nearly Rs 11 lakh crore of the old Rs 1000 and Rs 500 notes were back in the banking system, with about a month more left to deposit the old notes. According to the report, small and medium scale businesses, which hold 40% to 50% of the demonetised notes, have found ways to push back money into the system.

He further reasons that the sudden increase of deposits in Jan Dhan accounts, the entire amount of Rs 29,000 crore is from just 3 crore accounts out of the total 25 crore Jan Dhan accounts. That means, 3 crore Jan Dhan accounts were used to launder money. Had these been genuine deposits, they would have been spread evenly across 25 crore accounts, not just 3 crore accounts.

My Take

The sudden announcement of demonetisation was an rude shock to most people. They invented ingenious ways to exchange/deposit their money.

One of the ways people found was to buy gold from jewelers who reopened shops and continued selling their stocks till they lasted on the night of Nov 8/9, charging exorbitant prices.

There are reports of people using the bank accounts of others, apart from Jan Dhan accounts as mentioned above. There were millions of bank accounts which were either dormant or rarely operated accounts many of which could be used by hoarders. Also, there were such accounts offered on hire.

Then there were some bank officials who colluded with money hoarders to exchange notes illegally, and many such officials were caught red-handed.

Temple accounts and accounts in cooperative banks were misused. Post offices, railway, petrol pumps and many other agencies were authorized to exchange/receive banned notes. Taxes and bills of utilities such as electricity and some others could be legally deposited using banned notes.

Practically every department of the central and state governments was involved in exchange/deposit of invalidated currency. All these present several millions of legal and illegal opportunities to launder money for those who really had black money. And they used the available opportunities.

Those who suffered untold hardships were the poor people and those who were not black money hoarders.

Thursday, December 1, 2016

Handling Payday Rush Post Demonetisation

Banks, private sector, governments and public sector enterprises are bracing up to face the challenges that will unfold during the first payday season since the sudden notes ban announcement. Banks across India are getting ready, though reluctantly, to face a massive rush for cash.

Though salaries get credited to the accounts of employees, they need to withdraw cash either from banks or ATMs. This will double or triple the queues that are still found before ATMs and bank branches. Additionally, a vast number of ATMs are still not recalibrated and hence unusable. Added to that, even before the expected payday rush, ATMs used to be emptied out no sooner than they were replenished with cash.

That means, longer queues, and a huge loss of working days on a national level. Besides, the restrictions on withdrawal of cash will be another impediment. This will put additional pressure on banks to fill up their ATMs and to permit higher withdrawals to reduce the queues.

The demonetisation of high value currency notes announced on November 8 took 86% of cash out of circulation all on a sudden. The result is a huge cash crunch affecting almost all people, especially the lower middle class, farmers and the poor.

So, whoever could manage to exchange old notes or withdraw from their accounts are hesitating to spend except for basic and urgent necessities. This resulted in an artificial cash shortage because money as usual did not go into circulation. That means, newly printed notes would not get back to the system as fast as expected.

Well before the payday season, the government and banks have been preparing to deal with the situation, but not, expectedly, enough. As per reports, banks are expected to see disbursal up to 30% more than usual due to withdrawals from accounts of salaries and pensions.

Ever since demonetisation was announced, the Reserve Bank of India (RBI) was planning to meet the challenges of the first payday rush. Accordingly, the RBI has promised ‘there will be improvement in cash supply’ to meet the rush, and there will be more new Rs. 500 notes.

However, several bank branches did not get the new Rs. 500 notes at all. Only adequate supply Rs 500 notes will ease the banking system. It is because this particular denomination has been the standard one for easy transactions. People are reluctant to receive Rs 2000 notes as they are difficult to use for daily transactions.

After cash crunch hit people, Rs 100 notes took the role of Rs 500 notes too. Banks too were dispensing this smaller denomination, making its circulation increase by 150% since demonetisation. And, people have started hoarding Rs 100 notes also, resulting in more crisis.

Though the weekly withdrawal maximum limit has been fixed at Rs 24,000, several banks have imposed their own limits, saying they cannot allow more than Rs 10,000 for shortage of notes. Even withdrawals from Jan Dhan accounts have been limited to Rs 10,000 a month, at least for now.

What can be understood from various reports is that, though government security presses are trying hard, they are unable to print enough currency to replace the banned notes to meet the demand. The problem is not with disbursing banks, but with the supply of notes. So, till the government can supply sufficient number of notes of the required denominations, the problems are likely to continue. And the withdrawal restrictions will also continue.

Let us see how the payday rush worsens or eases the current crisis.

Tuesday, November 29, 2016

Black Money Links to Garib Kalyan

On June 26, 2016, PM Narendra Modi provided an opportunity to black money holders to disclose their incomes under the Income Declaration Scheme (IDS) and be part of a transparent system. He also announced the government will neither ask the source of the untaxed wealth nor conduct any investigation on the matter.

Now, the government is going to give another chance to convert unaccounted money by introducing the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana (PMGKY).

The value of the banned Rs 500 and Rs 1000 currency notes was 86% of the total money in circulation when demonetisation was announced on November 8. It amounts to over Rs 14 lakh crores. Out of this, between November 10 and 27, only Rs 8.45 lakh crore (including exchange of Rs 33,948 crore) has come back to the banks. That leaves a whopping sum of over Rs 5.55 lakh crore still hoarded. Where will it go?

One possibility is the remaining invalid notes may find the way to the banks somehow and become transparent, white money!

In the initial phase of demonetisation shock therapy, people burned crores of rupees (a Mumbai-based hawala operator reportedly burned old notes worth Rs 500 crores). Some persons slipped in old notes into temple hundis. Many others invented their own jugaad to convert banned notes. The result was unbelievably long, serpentine queues in front of banks.

Initially, under shock, despair and confusion, a lot of people privately exchanged old notes at whatever rates they could get. Some others hired unemployed people to stand in queues and exchange notes. And some enterprising jugaad masters even started illegal exchange rackets. All these privately exchanged money had to finally end up in the banks. So, the bank queues further stretched to miles, and new dubious means opened up.

Reportedly, a few bank officials were arrested recently while illegally exchanging old notes bending RBI guidelines. The rate of commission charged by them is 30%. That is only the tip of the iceberg. If a few were caught, how many more are not caught and, perhaps, still earning huge amounts of commission?

People also invented several new monetization channels. Some of these are Jan Dhan accounts, temple’s bank accounts, tapping cooperative banks, and many more such conversion routes. These, and more, were reported by newspapers and electronic channels.

There is a possibility of most of the hoarded money finding the way into banks before the deadline. Yet another possibility, as the government banks on, is that the money can be attracted by a new scheme.

And here is what’s on offer. The new chance, the Pradhan Mantri Garib Kalyan Yojana (PMGKY scheme) is a one-time scheme that will remain open only till December 30.

Those who want to use this chance have to pay tax, penalty and surcharge totaling 50% of the unaccounted money. The 50% is made up of income tax @ 30%, penalty @ 33% of tax (or 10% of declared amount) and PMGKY cess @ 10% of the declared amount.

They also will also have to deposit 25% of the disclosed sum in the PMGKY scheme fund at zero interest rate for a lock-in period of four years.

Those who miss this chance still can declare the hidden income by filing tax returns at the end of the financial year. But they will have to pay tax at a punitive rate of 60% and surcharge @ 25%, leaving only 25% with them. In some cases, an additional penalty can be levied at 10%. In case of misreporting or other irregularities, the levy of 50% can go up to 200%.

The aim is to use a part of tax dodgers’ money for the welfare of the poor, as the name of the scheme suggests.

Protests against Demonetisation

Several opposition parties organised a Jan Aakrosh Diwas (public outrage day) on Monday to protest against demonetisation of high value currency notes. The parties said they do not seek a rollback of the scheme but want urgent measures to help rural India, especially the farmers stranded without cash. The Congress party, leading the agitation, was the first to call for protests. Others joined them later. The Congress said they did not call for a Bharat Bandh. Only the Left Front had called for Bharat Bandh.

The protests were more or less peaceful. There were almost no protests in several states. A state-wise account of the protests, in brief, compiled from various news reports follows.

Andhra Pradesh

The response to the strike call was lukewarm in Andhra Pradesh. The ruling Telugu Desam Party (TDP) did not support bandh. Though Congress too did not support it, it took part in protests and torched effigies of PM Narendra Modi at various places. The main opposition party, YSR Congress, of the state and the Left Front parties, tried to disrupt bus service and to shut shops. However, the response was poor. The Chief Minister N. Chandrababu Naidu was the lone top politician to consistently demand the ban of 500 and 1,000 rupee notes.


Road traffic and normal life were mostly not disrupted in Bihar, but rail traffic was affected with 15 trains stranded at various places. The Congress held a Jan Akrosh Diwas march in Patna. The supporters of the Left such as CPI, CPI (M), CPI (ML) and others blocked trains at Bhagalpur, Gaya, Jehanabad, Muzaffarpur and Patna stations. The Bihar Chief Minister Nitish Kumar, who supports demonetisation, has said that his party, JDU, is opposed to the protests.


The Congress, NCP, AAP and CPI (M) organised token protests in Goa. The Congress held protests near the main office of State Bank of India in the capital, Panaji.

Himachal Pradesh

The Himachal Pradesh government (Congress-led) did not participate in Bharat bandh.

Jammu and Kashmir

Police detained Congress party supporters participating in Jan Aakrosh Diwas rally in Jammu.


The Congress and CPI (M) held rallies in Bengaluru. The Congress government in Karnataka said it would mark the Aakrosh Diwas rather than a bandh. The state Education Department had allowed colleges and schools to be closed, but schools were mostly open. Public transport was not affected.


Cabinet ministers of the ruling Left Democratic Front (LDF) and MLAs of CPI (M) participated in a protest march in Thiruvananthapuram, the capital city. The bandh disrupted normal life in the state. Schools, colleges, shops, public transport and offices remained nonfunctional. Even private vehicles were stopped by protestors in north Kerala. In some places auto-rickshaws were plying. Patients visiting the Regional Cancer Centre and railway passengers were transported in Police vehicles. Sabarimala pilgrims and marriage parties were exempted from bandh. It’s the peak tourist season in Kerala. So, the government exempted tourists from the bandh.


The NCP called for protest marches in several districts. The Congress party held a Jan Aakrosh march from Kalina in Mumbai.


In the state capital Shillong, Congress workers organised a rally, holding posters that read ‘organised loot’, ‘legalised plunder’ and ‘monumental mismanagement of demonetisation’.


The Nagaland Pradesh Congress Committee staged a protest rally in the commercial centre Dimapur, and the District Congress Committees held rallies at district headquarters.


The BJD-led government, which backs demonetisation, ordered schools and colleges to close, fearing law and order deterioration. But Maoists supported bandh. Congress supporters and workers of the Centre of Indian Trade Unions (CITU) affiliated to CPI (M) protested before the RBI office in Bhubaneswar.

Tamil Nadu

The Dravida Munnetra Kazhgam (DMK) held protests in Chennai. The leader of the opposition M K Stalin and a party worker were detained by police.


The ruling party Telangana Rashtra Samithi (TRS) decided not to support bandh. Though the Congress too stayed away citing inconvenience to traders, it staged protests and torched effigies of PM Narendra Modi at various places. Life was normal, except a number of auto-rickshaws going off the roads.


Life was disrupted in Tripura as the Left Front organised Bharat Bandh. Vehicles remained off the roads. Offices, shops, educational institutions and banks were closed. Rail transport was disrupted as workers of the leftist parties blocked trains.

Uttar Pradesh

The Samajwadi Party (SP) workers torched an effigy of the Prime Minister in Allahabad. Leaders of both BSP and SP said that they are not enforcing Bharat Bandh but they are only protesting against demonetisation. Normal life was not affected in the capital Lucknow as the traders union refused to shut shops. Markets, including Aminabad, Hazratganj, conducted business as usual. Shops in Shahganj market in Agra remained open though Monday was a weekly off day.


Life was normal in Uttarakhand on Monday, with business establishments and educational institutions remaining open. However, the Congress held rallies at all district headquarters.

West Bengal

Life was normal in West Bengal despite the Left Front call for bandh. Public transport and markets were functioning normally. The strike was opposed by the ruling Trinamool Congress (TMC). So, the state government ordered all employees to attend offices, with some exceptions. The Chief Minister Mamata Banerjee joined a protest rally in Kolkata. Banerjee wants demonetisation to be reversed. The leftists, including CPI (M) and CPI, staged protests.

Monday, November 28, 2016

Bankers Blues and Customers’ Woes

The Axis Bank Currency Conversion Case

Officials Axis Bank in Kashmiri Gate, Delhi, converted scraped notes worth Rs 30 crore for a hawala operator. On Friday, the Income Tax (I-T) department searched the bank premises and the residences of two senior bank officials who exchanged new Rs 500 and Rs 2,000 notes for old notes worth Rs 30 crore. The bank officials took 30% commission in gold bars from the hawala operator. Delhi Police had alerted the I-T officials after the arrest of a person with Rs 3.5 crore on November 21. According to Axis Bank, the customer who deposited the amount has been operating a current account for four years and deposits were made in his accounts. According to I-T officials, red flags were raised since a Gujarat bank official was caught receiving bribe of Rs 4 lakh in new Rs 2,000 notes on November 18. This is the first case of direct evidence of bank officials’ involvement in illegal conversion of banned notes and their collusion with hawala operators.

Four Employees of Bank of Maharashtra Suspended

Udgir is a small town in Latur district of Maharashtra. Four employees of the Bank of Maharashtra branch in Udgir exchanged invalid currency notes worth Rs 15 to 20 lakh fraudulently. They were caught and suspended. These bankers simply made unauthorized entries in the accounts of several customers. They too charged a commission of 30% from a local trader – seems to be the standard rate. Another employee of the bank promptly alerted the customer whose account was manipulated. The victim customer got frightened, rushed to the bank and made a hue and cry thereby alerting the manager and other staff. Inspector Balaji Sontakke of the crime branch of Latur said that their teams reached the bank where an audit was going on. He said depending on the outcome of the audit, a case would be registered.

The Noida Banker Helping a Friend Caught

Manoj Sharma, the branch manager of Oriental Bank of Commerce, Noida Phase 2, Uttar Pradesh, was caught by police while to helping a ‘friend’ change his black money. Sharma was caught while handing over Rs 1 lakh to the friend who had come with 25 ID proofs to cheat RBI rules on exchanging scrapped notes. The manager closed the bank on the pretext of running out of cash. Alert and aggrieved customers informed the District Magistrate N P Singh that ‘a few people were being entertained inside the branch’. Immediately Singh asked police to raid the branch. Police nabbed Sharma red-handed, while a long queue was waiting outside. Singh said that the police had shot a video of the incident as evidence and that a report had been sent to the bank’s Chairman and the finance ministry. According to the local people, black money hoarders do not have to stand in queues because they have their ‘friends’ in the bank, who help them by accepting several IDs provided either by the bank staff, or obtained from mobile phone shops. Another bank manager from Meerut reported that some persons approached him for IDs in bulk to exchange Rs 5 lakh worth of old notes, but he refused the offer.

Bank Accounts for Hire

Financial Intelligence agencies have dug up over 1,650 bank accounts which are on hire. Some people have been letting out their scarcely operated accounts for monthly rents from Rs 10,000 to Rs 15,000 to black money hoarders. One person had hired as many as 115 accounts. Agencies, which are scanning deposits made since November 8, issued show cause notices to such account holders. Agencies are trying to find out whether it is an organised racket, or run with connivance of bank staff. They are also looking into the role of bank staff in letting out accounts to convert black money. Reportedly, some bank officials were demanding 20% to 25% commission for depositing black money. On Thursday, agencies analyzed Suspicious Transaction Reports (STRs) from various states. They found 462 accounts from Bihar, 308 from West Bengal and 98 from Punjab had sudden surge of operations since Prime Minister Narendra Modi announced the demonetisation drive.

Jan Dhan Account Holders Caught Unawares

Jan Dhan account holders in Ludhiana alleged that they are refused withdrawals from their bank accounts. Bank officials said the trouble is only for accounts showing ‘dubious transactions’ and they had frozen such accounts. They said they have noticed that “gullible people are depositing hoarded cash into their Jan Dhan accounts”. The officials also said the frozen accounts are of people who have not fulfilled the Know Your Customer (KYC) norms and deposited cash after November 9.

Are Bank Officials Trading Your KYC Documents?

Several customers are stumped as bank officials tell them that they have already exchanged old notes, though it may be their first visit to the bank after demonetisation was announced. They allege that bank officials may be misusing their KYC documents. Some customers suspect that some bank officials may be misusing photocopies of KYC documents submitted with their banks. A Reserve Bank of India (RBI) official said that customers are not required to submit photocopies of any such documents but they can just show bank officials any of their identification proofs. If banks have customer’s KYC details, there is no need to provide additional proof. The official advised if there is any instance of manipulation, customers can approach the banking ombudsman.

Sunday, November 27, 2016

Are Jan Dhan Yojana Accounts Repository of Black Money?

News reports indicate that there is a sudden surge of deposits in Pradhan Mantri Jan Dhan Yojana accounts following demonetisation of Indian currency announced on November 8. The deposits since have soared by around Rs. 27,198 crore in 14 days.

The Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched on August 28, 2014 for promoting financial inclusion by providing banking services to the disadvantaged segments of society and with the objective of ensuring at least one bank account for every household.

As on 23 November 2016, total balance in 25.68 crore Jan Dhan bank accounts was Rs. 72,834.72 crore, as against the total balance of Rs 64,252.15 crore on 9 November. Out of 25.68 crore accounts 22.94 per cent are zero balance accounts, though the number of zero balance accounts have slightly declined.

However, the government and RBI have been alerting Jan Dhan account holders not to misuse their accounts by allowing black money hoarders to deposit the scrapped bank notes into their accounts, or allowing conversion of black money.

There are also reports that the Income Tax department is looking into the sudden surge in deposits, though the final data on the deposits will be available only after December 31. However, as the RBI has asked banks to send comprehensive reports, including denomination-wise deposits, these account holders need to be cautious and not misuse their accounts.

Also, there are various reports showing that unscrupulous hoarders of currency notes, hawala operators and even some business men using the Jan Dhan accounts, paying even a commission to the account owners.

The problem with many account holders is that many of them are either poorly educated or illiterate. They simply do not understand the implications of illegal currency conversion. For a poor person, money is only money and he or she cannot differentiate between black and white money.

What makes situation serious for these account holders is that the accounts were almost dormant for quite a long time and all of a sudden, when high value currency could not be exchanged elsewhere, most of them went and deposited the money accumulated with them in their bank accounts. Within limits, they are safe, but exceptionally bulged accounts may not stand the scrutiny of the tax sleuths.

And it is quite normal for rural India to keep whatever savings they have at their own houses. Even money for the marriage of girls are saved and accumulated in cash. Several people buy and sell land and other high value items using cash. That is the kind of economy in rural India. So, these people can be easily exploited by money lenders, cash hoarders, blade companies and other illegal operators.

Thursday, November 17, 2016

Demonetisation causes 33 deaths, and counting

I am writing this after reading a detailed report of several deaths published by the Indian Express. Sadly, whatever may be the good intentions behind demonetizing Rs 500 and Rs 1000 notes, precious lives are lost for no obvious reasons directly attributable to them.

As many as four children died because hospitals/doctors refused to treat them as their families could not pay the hospital bills in currency other than the demonetised notes. A newborn baby died in Rajasthan because the driver of an ambulance refused to take the child to the hospital. In Sambalpur town in Odisha an auto rickshaw driver refused to take a two-year-old child to the hospital and the child had a premature death.

These sad incidents should shake the conscience of the entire nation, the politicians and leaders of both the ruling and opposition parties, and the entire humanity, and the guilty should not be spared.

As many as eight more unfortunate deaths occurred due to heart attacks and shock. Two men suffered attacks while watching PM Narendra Modi announcing the demonetisation – one is a Faizabad businessman and the other a Kanpur man who had received an advance payment of Rs 70 lakhs for selling his land. Curiously, a State Bank of India cashier from Bhopal too became a victim of heart failure, probably not because of any banking inconvenience.

The cases of two men – one from Kaimur district of Bihar and the other from Tarn Taran in Punjab were because both were planning the weddings of their daughters and their inability to exchange their hard-earned money may have triggered the attacks. The deaths of a 40-year-old washerwoman from Kushinagar, Uttar Pradesh, and the farmer from Tarapur, Gujarat, and the senior citizen from Mumbai were because they could not exchange or deposit their old notes.

These are not superrich people or those who had unaccounted wealth, but people who just could not think of losing their lifelong earnings and see their families suffer the pain and hardships. They would not have had such fates if they had black, counterfeit or illegal money. And if a poor family puts away a few hundred bucks per month for marrying off a daughter, it cannot be treated as illegal by any stretch of imagination, no matter whatever the law provides.

And there are eight suicides reported, five women and three men, from the states of Chhattisgarh, Tamil Nadu, Madhya Pradesh, Uttar Pradesh, Gujarat, Karnataka, and Telangana. Mostly, these were poor people who were not able to exchange their old notes and those who were unable to buy food for their families. The case of the farmer from Raigarh, Chhattisgarh, who committed suicide as he could not exchange a meager Rs 3,000 to send to his children stranded in Tamil Nadu, is the most heartrending and it shows the level of poverty. Successive governments could not eradicate poverty though it is going to be seven decades after India’s independence. That is an entire lifetime of poverty and deprivation.

And the suicide in Bulandshahr, Uttar Pradesh, of the 17-year-old son of a BSF jawan when his mother was unable to give him legal tender points to many other inadequacies. The case of the 24-year-old Rizwana from Delhi who hanged herself because she could not exchange her old notes for three days is also deplorable.

Nine senior citizens, eight men and one woman, died, after collapsing while waiting in queues in front of banks for long hours, the oldest being a 96-year-old man who collapsed in front of a bank in Udupi which was yet to open in the early morning. They are from the states of Karnataka, Uttar Pradesh, Maharashtra, Kerala, Madhya Pradesh, Bihar, Telangana, and Gujarat.

A man from Howrah, West Bengal, killed his wife who returned home from an ATM empty-handed. Can it be attributed to demonetisation of Rs 500 and Rs 1000 bank notes? Well, the answer may be ‘no’. Or, some legal eagles may argue that it is a murder the foulest, or even of the rarest of the rare category. But the truth may be that the poor suffering man could have gone mad because of the financial mess he was forced into, now compounded by making even his hard-earned money inaccessible to him.

Fight against corruption, eradication of black money and fake currency, and all other high sounding principles are meaningless for him, and others who suffered for no mistakes of theirs.

Tuesday, November 15, 2016

Demonetisation hit hawala and fake currency the most

Queue at Bank to Exchange INR 500 and 1000 Notes - Salt Lake City - Kolkata 2016-11-10 02103

People standing in queue outside a private bank to deposit and exchange Rs 500 and Rs 1000 currency notes at Salt Lake City, Kolkata, West Bengal, India.

Following the demonetisation drive by the government, a lot of people who have accumulated Rs 500 and Rs 1000 notes have panicked and acted in bizarre ways. Some others destroyed/burned money that they thought could not be used. Several real estate dealers, transport operators, wholesale traders and others who used to do business in cash only adapted strange ways to convert their defunct bank notes to legal tender. Here are some of the instances that I could read today.

A 60-year-old woman named Mariyumma Muhammed, a native of Kotukkara near Kondotty in Kerala’s Malappuram district, went on Saturday to the SBI branch at Kondotty with 49 currency notes of Rs 1000 denomination (Rs 49000). Finding 37 of the notes counterfeit (Rs 37,000), the SBI officials informed the police who arrested and later remanded her to judicial custody. On questioning, she said her sons working in the Gulf sent the money through Hawala channels. The money was meant for construction of a house.

According to various reports the counterfeit currency notes seized from various places in Kerala in the last few years were printed outside India. Continued and intensive checking and seizure of fake currency by the authorities only forced the operators to change their modus operandi to transport and use Indian Fake Currency Notes (FICN).

According to reports, FICN operators have widespread networks in Kerala and Karnataka and receive over Rs 50,000 crore through Hawala. Almost all the money meant for funding terrorism and other antinational activities enters India through this route.

In another case after the demonetisation drive, Sumit Kumar Tudu of Kendrapara district in Odisha was arrested by Odisha police. He went to deposit Rs 2.5 lakh in the SBI branch at Khurda town near Bhubaneswar. The bank officials found 42 fake notes of Rs 1,000 and 10 fake notes of Rs 500 totaling Rs 47,000. Deba Prasad Kanhar, the in-charge of SBI Khurda, said that they informed the police. Sumit Kumar Tudu claimed that he is the son of a bank officer and his father asked him to deposit the money in his father’s account.

In another sad case, a 48-year old man named Unni, a Kerala State Electricity Board (KSEB) employee, who came to deposit Rs 500,000 worth banned high denomination notes in the State Bank of Travancore in Thalassery, fell to his death from the second floor of the building.

Interestingly, within days of introduction of the new Rs. 2,000 note, Ashok, an onion grower in Chikkamagaluru in Karnataka, was cheated by a stranger with a photocopy of the note on Saturday morning, which he came to know only when his friends told him later.

The new 500 and 2,000 rupee notes are considered "high security" notes having several new security features and cannot be easily counterfeited compared to the now invalid notes.

As a result of demonetization, the Hawala racketeers in Mumbai have taken the worst hit and no transaction is likely to take place in the near future. Business circles in Mumbai fear it will pull down businesses that are accused of heavily depended on such illegal money.

Banks in the country received 3 trillion rupees ($44.4 billion) in the in the first four days after the government’s move to ban high denomination notes on November 8, the Finance Ministry said on Sunday.

The Reserve Bank of India (RBI) on Sunday directed all banks to submit daily reports of cash withdrawals across the counter and through ATMs in order to compile accurate data of currency circulation.

That finally comes to drying up of all the resources of fake currency notes and money in the illegal money transfer circuit, at least for now. Also, a lot of money that avoided the banking route will now get deposited and there will be a huge churning in the entire Indian economy. Of course, there are difficulties being faced by the common people, but I think it help in the long run.

Monday, November 14, 2016

Baba Ramdev and demonetisation of high value currency notes

On June 6, 2011, I wrote an article for this blog on Yoga Guru Baba Ramdev after I read the news of his eviction by the government from Delhi’s Ramlila Grounds. He, along with his followers, was protesting against black money then.

Now again he caught my attention when he told a news agency, “During war, our soldiers fight sans eating for 7-8 days; so can’t we do the same for our nation?”

In the report by the agency it is also brought out that in 2012 Ramdev asked the then Congress-led government to discontinue the Rs 500, Rs 1000 notes.

Now that his wish has been fulfilled by the Narendra Modi government he must be very happy. So, he is busy batting for the demonetisation announced by Modi, and therefore defending the move as vigorously as a ruling party politician, though he is not one.

It is not only long queues outside ATMs and banks, there were reported deaths and also injuries to people as well some people getting angered and breaking glass windows and other properties of banks too. These could have been avoided with a little more right information being given to people just after the announcement of banning the Rs 500 and Rs 1000 notes, or at least when people rushed to the banks for exchanging notes or for depositing the notes in their accounts. It could have been by displaying the correct information at a few prominent spots in front of banks or distributing a few handbills containing the required information.

What happened was that most of the people who rushed to the banks and ATMs had only half-baked information or the wrong information that almost made them believe that all their hard-earned money is banned or otherwise lost because of the government action.

Here are a few incidents that I heard from various people and some tidbits that I read from newspapers:

In Delhi, a lot of people reportedly wasted their money by exchanging a Rs 500 note just for a short distance auto-rickshaw ride worth Rs 30, giving away the note just for buying a soap cake, or such small items.

Some devout and god-fearing persons found the donation boxes before temples as the repository of banned banknotes as they believed that donating the notes to the God will at least get them salvation – or they wanted to cheat the god too? A newspaper carried the photo of some pundits of a temple in Noida, UP, sitting with a huge pile of cash in order to count and stack them.

Another report in the newspapers said that some enterprising traders opened separate counters in their shops to exchange the notes at discounts ranging from 40 to 50 percent.

Those who had a little more to exchange scrambled to jewellery shops to buy gold. The gold traders too made hay as they raised the price of gold from Rs 40,000 to Rs 50,000 per 10 grams against the prevailing rate just around Rs 31,000. The jewelers sold out their stocks within no time and downed their shutters.

Some of the super intelligent and over smart persons searched for beggars in Delhi’s streets and told them to exchange their small change for the bigger denomination notes.

I personally heard a few people in my neighbourhood cursing the banks, the government and whoever they thought were responsible for the imagined loss of their hard earned money.

All these people seriously believed that they were carrying not banknotes of any value but just pieces of paper. Apart from whatever half-baked information they had, the shop keepers and whoever they talked to, just told them that the notes are banned and they are worth nothing.

The above anecdotes simply tell you that all the chaos, the serpentine queues, etc. were just because of misinformation.

Here are a few more things reported by the newspapers.

A 55-year-old woman named Vinoda who had recently sold 12 acres of land for Rs 54 lakh committed suicide in Mahabubabad district in Telangana on Thursday. Her family had spent Rs 4 lakh and had Rs 50 lakh left in cash. After hearing about the demonetisation she believed that notes were worthless and lost everything.

A nursing home in Govandi allegedly refused to treat a baby as a carpenter Jagadish Sharma, father of the newborn, could not pay Rs 6,000 in notes of Rs 100, though he requested to give him time to exchange the notes. The baby and mother were taken to another hospital where the infant’s condition worsened and he died before getting treatment.

There are several other similar cases reported from all over India.

I started with a reference to Baba Ramdev. Though I am not a follower of the Yoga Guru, I follow all the news about him and now I take special interest in reading news about his Patanjali Ayurved that has given a run for their money to multinational companies and top brands in personal care products and daily use items.

Along with the large number of his followers the Baba can help to educate the people at such critical times as I quoted above. What is needed is just passing on the right information at the right time. Alternatively, with the clout he has with some of the national leaders, he can persuade them to take care of such aspects.

Sunday, November 13, 2016

Demonetisation of banknotes in India: some political reactions

Queue at ATM for INR 100 Notes - Howrah 2016-11-08 1773

Queue at an ATM for money in Howrah, West Bengal, on 8 November 2016

Since Indian Prime Minister Narendra Modi declared Rs 500 and Rs 1,000 notes invalid on Tuesday in a sudden and unexpected move for demonetisation of high value banknotes and replacing them with newly printed notes of denominations Rs 500 and Rs 2,000, he has got a mixed bag of reactions. Some are hailing the move while some others are severely criticizing it. How some of the politicians reacted to the move are below.

Indian National Congress criticised the central government's move to ban Rs 500 and Rs 1,000 notes. Congress Vice President Rahul Gandhi said that it shows how little Narendra Modi cares about ordinary people. On November 11 Gandhi stood in queue outside the State Bank of India on Parliament Street in New Delhi to experience the ‘pain of the people’. He talked to some people to know their troubles. He said to news reporters who interviewed him, “Poor people are in trouble, I am here to get Rs 4, 000 exchanged. Neither you (the reporters) nor your crorepati owners nor the Prime Minister will understand the problems faced by people.”

Punjab Pradesh Congress Committee (PPCC) president Captain Amarinder Singh on Wednesday criticised the manner in which the government handled demonetisation. Singh said, “Though the move was a step in the right direction in order to curb corruption, terror funding and black marketing, the way it had been handled had led to chaos, with the small farmers, traders, daily wagers and the poor the worst hit.”

West Bengal Chief Minister and the chief of Trinamool Congress Mamata Banerjee tweeted, "I want to know from the PM how my poorest brothers, sisters who've received their week's hard earned wage in one Rs 500 note will buy atta, chawal, tomorrow?" She told the press in Kolkata on Saturday that despite ideological differences she is ready to work with CPI (M), Congress, Samajwadi Party, and Bahujan Samaj Party ‘to save the country’.

Delhi Chief Minister Arvind Kejriwal (AAP) alleged, "Demonetisation is a big scam... People close to BJP were alerted in advance. There were heavy deposits in banks in July-September quarter. Who deposited these thousands of crores suddenly?"

Mulayam Singh Yadav, the chief of Samajwadi Party (SP) that rules Uttar Pradesh, said on Thursday at a press conference in Lucknow, “The sudden ban on high denomination notes has caused immense hardships to commoners, farmers and the poor, the demonetisation has been done by the NDA government with an eye on elections, and not keeping plight of people in mind.” He further said, “We are against black money. SP has fought against it. We do not want use of black money in elections.” He demanded a rollback of the ban ‘for a few days in view of the wedding season’.

Uttar Pradesh Chief Minister Akhilesh Yadav (SP) asked the government to ‘take all possible steps to minimise inconvenience to common people’, adding, "Central government must set up special banking counters in villages and district centres to assist the public, villagers and farmers."

Bahujan Samaj Party (BSP) chief Mayawati told reporters in Lucknow, “Economic emergency like situations have been created by the government to hide their inefficiency. Poor people, middle class citizens, small businesses and farmers have been hit the most and not the people who have black money.”

The Communist Party of India (Marxist), CPI (M), on Wednesday alleged that the move will burden ordinary people and increase bureaucratic harassment of people. Sitaram Yechury, the CPI (M) General Secretary, described it as ‘poorly planned’. He tweeted, "To uncover the illicit money trail, we demand that the govt release the name of Top 100 defaulters of bank loans". "This demonetisation is attempted as a gimmick to divert attention from serious social and political failures of this govt in past 2.5 years."

Pinarayi Vijayan, Chief Minister of Kerala - ruled by the CPI (M)-led Left Democratic Front (LDF) - criticized the demonetisation saying, “It has to be understood that those who are having black money were aware of this earlier and hence they have not been affected with this. It has only affected the common man the most. The Centre has implemented this without looking into the practical difficulties face by the people." He wanted time till December 31 for people to use the existing notes.

Goa Chief Minister Laxmikant Parsekar (BJP) told reporters on Wednesday the demonetisation would not affect tourists who had arrived in the state. He said, “Like other people, the tourists can convert up to Rs 4,000, and usually they avail the facilities using credit cards. The inconvenience will be only for a day. From day after tomorrow, they can withdraw from ATMs”. He said he was personally happy with the ban which was to curb corruption, black money and terrorism. “There are some politicians who have stashed black money in their go downs. They are now having the sleepless nights,” he said, further adding that the clampdown on black money will also ensure that there is a ‘cleaner pre-election period’”.

Andhra Pradesh Chief Minister and the Telugu Desam Party (TDP) chief N Chandrababu Naidu described it as bold step. However, he suggested that reintroduction of high denomination notes should be revisited and urged the government to look for alternatives.

Swaraj Abhiyan leader Yogendra Yadav tweeted, "Positive move against counterfeit currency. Govt overplaying impact on black money. Opposition overplaying transitional problems."

It appears that demonetisation was initially welcomed by the people and political parties in India, with a few exceptions. But it is usually alleged that black money is used by politicians to influence voters during elections. State Assembly elections are going to be held in UP, Punjab, Goa, Uttarakhand and Manipur early next year. So, experts see a political angle in the move. However, the negative reaction to the government’s order, claiming to curb black money and counterfeit banknotes, is not as much as it should be for such a drastic move.

As a result of demonetisation, most people ran short of cash, and there was no way to exchange the higher value notes. Neighbourhood shop keepers and other traders refused to accept the banned notes. Banks were closed immediately after the currency ban to replenish their old currency stocks with the newly printed series of 500 and 2000 rupee notes.

According to political analysts, its impact is expected to show up in the assembly election outcomes in the five states of Punjab, Goa, Uttarakhand, Uttar Pradesh, and Manipur to be held early next year.