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The <keyword id="37885" type="ORGANIZATION" weightage="20" keywordseo="Cash">cash</keyword> crunch in banks and ATMs is expected to continue for at least one more week, according to an intelligence report which attributed the unprecedented situation to a huge gap in demand and supply of <keyword id="6378917" type="ORGANIZATION" weightage="20" keywordseo="Currency">currency</keyword> notes. 
 
Based on a report prepared by the intelligence agencies, Home Ministry officials said there has not been enough money in circulation. 
 
People are hoarding smaller denomination and not spending Rs 100 notes which they are getting either after exchanging the defunct Rs 500 or Rs 1,000 currency notes or from the ATMs, they said. 
 
Due to a huge gap in demand and supply of currency, the cash shortage will continue for at least one more week, officials said. 
 
The new notes of Rs 100 and Rs 500 are not in circulation in enough numbers, leading to the inconvenience faced by the people. The problem is acute in Delhi and a few major urban centers as not enough ATMs are working and refill remains very slow. Unless the ATMs are operationalised as early as possible, the long queues outside the banks will continue, the officials said.

Cash crunch to continue for one more week: Intel report

The government has announced a new rule to prevent people from making multiple cash deposits in their bank accounts without quoting their PAN card number. Till date, the limit for cash deposit without PAN was Rs 50,000 per transaction. A lot of people were depositing less than Rs 50,000 per day to escape the PAN provision. 
 
<a href="http://www.businessinsider.in/5-crucial-developments-in-the-startup-space-you-must-know-about/articleshow/55456342.cms">A circular issued yesterday</a> says deposits made between 9 Nov and 30 Dec 2016 will require a PAN if the combined sum exceeds Rs 2.5 lakh. This clarifies the misconception that one can deposit cash in tranches of less than Rs 50,000 and escape mentioning the PAN. 
 The <keyword id="128665" type="ORGANIZATION" weightage="20" keywordseo="CBDT">CBDT</keyword> has also made changes in the (AIR) Annual Information Return rules. Till now, banks and post office branches were supposed to report to the tax department if an individual <a href="http://www.businessinsider.in/The-pros-and-cons-of-e-wallets-like-Paytm-Freecharge-and-Mobikwik/articleshow/55437683.cms">made cash deposits of Rs 10 lakh in a year. </a>During the period 9 November to 30 December, this limit has been lowered to Rs 2.5 lakh. If the cash deposits exceed this limit, the bank or post office will automatically report it. 
 
<a href="http://www.businessinsider.in/SBI-cleans-up-its-balance-sheets-by-writing-off-loans-of-63-willful-defaulters-including-Vijay-Mallya/articleshow/55457144.cms">ALSO READ: SBI cleans up its balance sheets by writing off loans of 63 willful defaulters, including Vijay Mallya</a> 
 
The CBDT has also made changes in the (AIR) Annual Information Return rules. Till now, banks and post office branches were supposed to report to the tax department if an individual made cash deposits of Rs 10 lakh in a year. During the period 9 November to 30 December, this limit has been lowered to Rs 2.5 lakh. If the cash deposits exceed this limit, the bank or post office will automatically report it to the tax department. For current accounts, the threshold limit for cash deposits between 9 November and 30 December will be Rs 12.5 lakh. 
 
The rule applies to all bank accounts of the individual, though it is not clear how banks will be able to capture information on cash deposited in other bank accounts.

Now, PAN required if combined cash deposits exceed INR 2.5 lakh till December 30

The <keyword id="25455" type="ORGANIZATION" weightage="100" keywordseo="finance">finance</keyword> ministry today asked banks to consider engaging retired employees to deal with the unprecedented rush for the exchange of invalid currency notes and ease pressure on existing staff. 
 
In a letter written to Indian Banks' Association (IBA), the financial services department of the finance ministry said it should look into issues, particularly employment of retired bank staff and payment of remuneration and instruct the banks suitably at the earliest. 
 
 "In the event of extra business hours implemented to cope up with the situation, banks may require making deployment plan of staff on shift basis so that the same person does not work for continuous long hours," it said. 
 
Praising commendable work done by the banking fraternity, it said banks may plan and support the officers and employees working in late hours, particularly the safety and security of women employees, with arrangements for food and conveyance. 
 
Additional infrastructure like more terminals, separate arrangement for cash, exchange and dispensation may be implemented and services of retired persons may also be taken so that the pressure of existing staff may ease and a larger customer base is satisfied, it said. 
 
Many employee unions have made representation to the finance ministry and IBA presented the multiple problems being faced by employees and officers on account of implementation of the demonetization scheme.

Demonetisation: Finance ministry asks banks to hire retired staff to deal with cash rush

Amidst a growing culture around the world characterized by “if you’re not with us, then you must be with ‘them’”, I hope my post will be read with an open mind and will be taken in the right spirit. 
 A lot of eminent people have lauded the recent move by the government to ban R.500 and R.1000 notes as bold and a master stroke. Any objections to this move have been primarily based on the day-to-day inconvenience it is causing to common people. Proponents of the move have urged their fellow citizens to bear with these inconveniences for the larger good - the interest of the nation. But is there a clear case for its effect on the <keyword id="34412" type="ORGANIZATION" weightage="100" keywordseo="economy">economy</keyword> to be positive? 
 
The key assumption behind the move is that the large informal economy in India (estimated to be almost equal in size to the formal economy), will now be forced to integrate with the formal economy giving it a huge boost. While the note ban would no doubt stifle the informal economy, have we created the other necessary conditions for the informal economy to join the mainstream? Clearly, no. If we do not create these facilitating conditions alongside with the measures to restrain the informal economy, then we are addressing only a part of the problem, and further aggravating the situation. It is like demolishing slums without creating alternative housing for the slum dwellers. Let me explain it better by taking the example of one important part of the informal economy - the informal lending market. 
 The informal lending or credit market exists in parallel to the formal credit markets such as banks (state, private, co-operative), non-banking finance companies (<keyword id="6354598" type="ORGANIZATION" weightage="20" keywordseo="NBFCs">NBFCs</keyword>), micro-lending institutions etc. The informal credit market, which is estimated to be nearly equal in size to the formal one, consists of local moneylenders, pawnbrokers, politicians etc. The annual interest charged in this market could range from 18% to 300% and the lenders are typically portrayed as villains. Despite their many ills, many studies around the world have established the important role played by these players and the informal credit markets in supporting the formal economy. 
 
This is because the borrowers in this market are typically small entrepreneurs, uneducated and unskilled laborers, slum dwellers etc. who are assessed as non-creditworthy by the formal lending institutions and hence do not have access to formal credit. Informal markets are the only source of credit for these borrowers, who nevertheless contribute significantly to the economy through millions of small businesses. The scale of operations in this market is very small with the loans ranging from R.500 to R.5000, there is hardly any collateral and the entire money circulation is typically in cash. 
 Now I urge you to assess the impact of the note ban on this constituency. Because the high denomination cash is rendered worthless, a major part of the supply is cut off, at least temporarily. But the demand is still there! And there are no alternative sources of credit available to these borrowers. It is true that millions of bank accounts have been opened under the recent Prime Minister <keyword id="6392137" type="UNKNOWN" weightage="20" keywordseo="Jan-dhan-Yojana">Jan Dhan Yojana</keyword>, but that doesn’t make a difference as the banks’ lending conditions (need for collateral etc.) remain unchanged. Do you think banks will start lending to them overnight? No chance! So you will see a skyrocketing of interest rates in the informal market in the short term, much beyond the already exorbitant rates. 
 
Over a period of time new cash will be generated, but meanwhile, the squeeze on the borrowers, who are probably the true middle class, will be immense. A significant proportion of this borrower-base consists of small entrepreneurs who contribute to a large portion of our economic activity. It will be great if they can be brought into the mainstream economy but any measures for doing that are conspicuously missing in the recent announcement. 
 
So the ‘inconvenience’ to the common man is not going to be merely temporary as being assumed by the government. In fact, unless the government comes up urgently with a series of mechanisms to facilitate the integration of the informal economy with the formal, this move has all the potential to even bring down the government in the next election. 
 
To repeat, it has similar political and moral implications to demolishing slums without creating alternative housing. The key difference, in this case, is that the affected population is not just marginal, but actually constitutes the core India, arguably the real India. Politicians can go against them at their own peril. Viewed from this perspective, you have to agree with the experts that it is indeed a bold move! 
 
The author is Dr. Raveendra Chittoor, Associate Professor of Strategy and Canada Research Chair, University of Victoria, Canada

This Indian Professor tells us exactly how the demonetization will fail to curb black money.

Prime Minister demonitised Rs 500 and Rs 1,000 notes and it was a secret kept well. In his address to the nation, Modi said work on having new currency notes and clamping down on black money had started six months back and the entire operation was kept top secret. 
 
Modi government told the RBI to be all set for this bold move on black money, around six months ago. Before that, Modi had made the decision to phase out the current Rs 500 and Rs 1,000 notes. 
 
Modi made it a point that nobody gets to know about it, not even his own Cabinet as replacing 23 billion currency notes was going to be a gargantuan task. 
 
Modi sought to stop the transaction of black money with the aim of giving the economy a veritable leg-up. He knew if the move was a success, people would be compelled to use only legitimate transaction networks, which would automatically make the government's tax kitty bigger. 
 
As per the reports, officials that were involved in the demonetisation process were quarantined and notification on the move was printed in secrecy in the same press where the Union Budget papers were printed. The Cabinet members weren’t allowed to leave the room until the Prime Minister ended the address. 
 
Given the context of the crucial upcoming assembly elections in Uttar Pradesh, the move is aimed at giving BJP a "strong talking point, about "a decisive government,. Further, the ban on high-denomination notes is likely to have an impact on election expenditure in UP. 
 
Coming ahead of assembly elections in UP, the move is also likely to provide another campaign pitch for BJP.

You Searched For "demonitisation" and got 5 results

Cash crunch to continue for one more week: Intel report

PTI

Now, PAN required if combined cash deposits exceed INR 2.5 lakh till December 30

BI India Bureau

Demonetisation: Finance ministry asks banks to hire retired staff to deal with cash rush

PTI

This Indian Professor tells us exactly how the demonetization will fail to curb black money.

Guest Author

Here’s how Modi kept his master plan to flush out black money, introduce new currency under wraps

BI India Bureau

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