Monday, November 14, 2016

What happens next with the demonetization of ₹1000 and ₹500 currency notes

Indian Government have taken a very bold step to demonetize the prevailing ₹1000 and ₹500 currency notes. This have created chaos and inconvenience for the public, sure this have made good impact on the economy with crores of rupees flooding the bank accounts. The sudden vanishing of Trillions of rupee from the economy added with the lack of availability of lower denomination notes have caused a sudden lose of purchasing power for the Indian people temporarily.

The Government have assured to address the lack of currency in the next 50 days. But that means there will be more surprising steps in the coming days.

Consider the new ₹2000 currency note. It is just a piece of paper with such a low quality that it cannot endure the day-to-day use. The common man does not need such a high denomination note for his day to day use. One day can be managed by below ₹1000.

So what are the plans.

The current lack of availability of ₹2000 currency notes means the RBI is considering this as a temporary measure. When more currency notes of lower denomination is back in the economy and with more complains of quality and difficulty in tendering change of the new note, they can recall these notes.

Within the last 1 week most of the currency in circulation have reached bank accounts and now they are digital currency. Banks now have enough money to even reduce the interest rate and their profit will increase marginally.

The next important announcement will be the removal of all kinds of charges for Online and Credit/Debit card transactions. This will make it attractive so that people prefer not to wait in queue to get money from ATM and Bank. Unnecessary use of currency note will slowly be curbed. Adding a small incentive for the Online/CC payments will be added advantage. With the difficulty in getting currency notes from the ATM/Bank people are sure to opt for CC payments.

Uneducated poor people are also considered. Now that the Indian government have the finger prints collected for almost all of the citizens. The new payment gateway (UPI) linked devices will be equipped with finger print sensor so that even the uneducated people can use cards for transactions.

The cost of printing and circulating currency notes can be saved by the government.

With less black money in the market the mortgage and real-estate prices will soon come down. Honest Indians will get the benefit of lower prices.

Let us hope for the best and await new announcements from the Government for a new Bharat.

Jai Hind.