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Old 20th December 2016, 16:09   #1771
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

My concern here is, the govt keeps going back on their word.
First they took a U turn on the cash exchange provision
Now they have taken a U turn on their stand on scrutiny for deposits below 2.5L

In isolation, these actions are justified, but given that they had said the opposite some time ago, makes one wonder what U turn they are going to pull next.

You say that If i have done no wrong, I have nothing to fear. Yet despite being an honest taxpayer, my experience with the the I-T dept have suggested entirely the opposite.

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Old 20th December 2016, 16:15   #1772
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by poloman View Post
It became obvious that lot of bank crooks had played along.
Exactly. The reason why we do not see cash in the numbers laymen would like to see seems to be that the rich and the powerful , in connivance with bank officials, pilfered thousands of crores in hard new currency.
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Old 20th December 2016, 16:36   #1773
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by sajo View Post
Exactly. The reason why we do not see cash in the numbers laymen would like to see seems to be that the rich and the powerful , in connivance with bank officials, pilfered thousands of crores in hard new currency.
That should then mean that this whole exercise is an utter failure vis-a-vis it's original stated objective of flushing out black money!

Rich folks conveniently converted their old currency into new (so they get to keep their black money) while ordinary folks are having to stand in queues or even to do without cash.

If all the govt wanted was to convert old currency into new and have that done via Banks, they could have just given a longer window, say 1 year or 1.5 year, to deposit all 500/1000 notes in own bank account, with the currency still being valid for business all this time, or start with 1000 note only. This old to new currency swap has misfired really.

Last edited by joslicx : 20th December 2016 at 16:39.
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Old 20th December 2016, 17:12   #1774
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

Okay, all said and done, what is going to happen after Dec 30th? That is the date after which everything is supposed to get back to normal. I would hardly think so. In my opinion Govt. may do the following ...

1. Ease up on ATM withdrawals but still restrict it to certain numbers. For e.g. daily ATM withdrawals could be limited to Rs. 5000. I believe this condition might exist for some time to come. Given the push for cash less transactions, Govt. will try to restrict cash to go out into open market.
2. Withdrawal from banks will be eased with a condition that only deposits made in new currency will be allowed to be withdrawn. Any currency deposited in old currency could still face restrictions in withdrawal.
3. Given that Rs. 500 notes are still in short circulation, Govt. might extend the sops given to cashless transactions.
4. Cash unavailability in ATMs will continue at least for another month or so. I think, Govt. could restrict banks from giving out Rs. 2000 notes through ATMs.

On a positive note, Govt. may try to rationalize the Income Tax slabs which could finally give relief to many.
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Old 20th December 2016, 17:30   #1775
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by joslicx View Post
That should then mean that this whole exercise is an utter failure vis-a-vis it's original stated objective of flushing out black money!
Not, unless the govt does nothing to catch and mete out exemplary punishment to those who were involved in this. Going after BM hoarders like they have never done before would be the key here. With the money being cycled through banks, it would be easy for them to set up digital "nakabandi" and red flag transactions/individuals. A little draconian, but can only be done now before it all gets out of control again.

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Originally Posted by joslicx View Post
If all the govt wanted was to convert old currency into new and have that done via Banks, they could have just given a longer window, say 1 year or 1.5 year, to deposit all 500/1000 notes in own bank account, with the currency still being valid for business all this time, or start with 1000 note only. This old to new currency swap has misfired really.
That would really have defeated the purpose of the exercise right ?

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Originally Posted by sukhoi30 View Post
2. Withdrawal from banks will be eased with a condition that only deposits made in new currency will be allowed to be withdrawn. Any currency deposited in old currency could still face restrictions in withdrawal.
How would banks decide how much % of deposits came in which currency? I have very little cash deposits, and have not deposited anything in new currency so far.

Quote:
Originally Posted by sukhoi30 View Post
Given that Rs. 500 notes are still in short circulation, Govt. might extend the sops given to cashless transactions.
This.
I hope the government announces a 1-2% tax rebate on digital transactions for businesses ASAP.

On another note :
I just used PhonePe (फोन पे) app to transfer money into an individuals account. Amazed at how easy it is, without the need for transaction fees. I hope merchants start adopting it ASAP. However, one of my friend's salary account is being shown as "Frozen" for transactions. Any idea why ?
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Old 20th December 2016, 17:42   #1776
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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How would banks decide how much % of deposits came in which currency? I have very little cash deposits, and have not deposited anything in new currency so far.
A different form was used to deposit old currency into an account. Besides, they should have marked that deposit separately as they would have to send out report to RBI. But, yes, it won't be that easy to track.
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Old 20th December 2016, 18:10   #1777
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

One thing I have noticed is that some people are withdrawing cash as if there is no tomorrow, just to keep it in home for emergency. When questioned they resort to the oft repeated statement of 'My Money, so I have right to do anything with it'.

Now, anyone has idea on how much is the amount that is present in the deposit form with banks and how much is the cash component out of this. Because, if everyone start withdrawing their deposits, then will we have enough cash to serve them?
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Old 20th December 2016, 18:50   #1778
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by sajo View Post
That would really have defeated the purpose of the exercise right ?
But isint it ironical that the stated purpose of the exercise has already been defeated, thanks to all the corrupt bankers and the various intermediaries we have in the system. So what is the point of aam people being inconvenienced then?

Since it has been apparent now the goal posts have been changed. Now the big talk is about going digital which is actually fine by me as its not a big problem here in Bangalore. So as I said in my previous post, if all the effort was for getting big denomination cash in bank, then easier would have been to just give people 1 year instead of few hours! Sure some would have used their cash to buy gold/properties/productX but at the end of the day somebody would have had to put the money in the bank! All the money would eventually have come to the bank one way or the other. And nobody would have been inconvenienced.
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Old 20th December 2016, 19:39   #1779
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by jpcoolguy View Post
One thing I have noticed is that some people are withdrawing cash as if there is no tomorrow, just to keep it in home for emergency. When questioned they resort to the oft repeated statement of 'My Money, so I have right to do anything with it'.
After a flood last year and a cyclone just a week ago, where the electronic payment infrastructure went down for days on end, I'm surprised there are still people who need this to be explained to them.

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Originally Posted by joslicx View Post
But isint it ironical that the stated purpose of the exercise has already been defeated.... And nobody would have been inconvenienced.
I had raised the same doubt in this thread, and the responses were
1. just because all the money has been deposited in a bank, it doesnt mean its all white
2. RBI numbers are not accurate - double counting blah blah
3. wait and watch, the govt is going to catch them all using big data
4. Who said that was the stated purpose, or for that matter, if there was a single stated purpose in the first place.

and it eventually goes around in circles. Fans of the govt think demonetization is the greatest thing since sliced bread, and will use very innovative logic to defend it, and those who hate it will stage dharnas mourning for the people who died because of it, and those of us with a more nuanced perspective will go mad trying to explain our concerns to either camp
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Old 20th December 2016, 20:32   #1780
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by joslicx View Post
Rich folks conveniently converted their old currency into new (so they get to keep their black money) while ordinary folks are having to stand in queues or even to do without cash.
That is over simplification in my humble opinion. You are assuming that 100% of the black money has been converted to white. I don't think that is practically possible, as all black money hoarders would not have the same level of reach which the big wigs have. So yes, 100% of black money may not get caught, but it also does not mean 100% of black money has been laundered.

Quote:
If all the govt wanted was to convert old currency into new and have that done via Banks, they could have just given a longer window, say 1 year or 1.5 year, to deposit all 500/1000 notes in own bank account, with the currency still being valid for business all this time, or start with 1000 note only. This old to new currency swap has misfired really.
With the crooks we have in India, that would flop the day it is launched. The black money hoarders had a reason to use Rs.500 & Rs.1000 notes to hoard money. It is the most easily available one, and also very easy to stock up. Now if these crooks are all told that in one year these notes would get invalid, what do you think they would do? They would dispose all these, and get the new set of notes. Surprise was most important factor here.

When the notes were invalidated, the black money hoarders were given only two choices (legal). Put these notes all through a proper banking channel, so that it gets accounted and new currency issued. Keep quiet about their stock pile of cash, and see them becoming paper after 30th Dec. This whole exercise was a "roll call parade" of currency notes. The black money hoarders had to do away with their stock pile of Rs.500 & Rs.1000. Yes, they did try many tricks but there again 100% protection is not guaranteed.


Quote:
Originally Posted by joslicx View Post
But isint it ironical that the stated purpose of the exercise has already been defeated, thanks to all the corrupt bankers and the various intermediaries we have in the system.
Can you let us all know how you have successfully arrived at the conclusion that it is defeated? I am not being sarcastic here. The RBI itself has not completed their analysis and filed the report. People still have time till Dec 30th to deposit their money.

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So as I said in my previous post, if all the effort was for getting big denomination cash in bank, then easier would have been to just give people 1 year instead of few hours!
The purpose of this was not to getting a bigger denomination from the bank. As I said, this was a very tough process of passing every Rs.500 & Rs.1000 note out there through a banking channel. Only this way can these currencies be audited. These notes had to be invalidated, as other wise there is no motivation for people to deposit the money in the bank. When people knew that if the old notes don't land up in a bank, it becomes just paper every one had to run to a bank (or to corrupt bank officials in a few cases).

Think this as a roll call parade at a hostel, or a military camp. Every 500 & 1000 note is now lined up for a parade, and each one literally says "present sir". Their count is tallied with what RBI (the commandant of the camp) knows as the strength of the camp/hostel. A few shady unauthorised people are standing on parade (fake notes), they get thrown out. A few more shady characters got involved in some crime (black money), and now are in a position NOT to return to the camp. RBI the big boss, now formally would strike them of the camp/hostel strength. They are no more soldiers or bonafide residents (illegal tender).

Quote:
Sure some would have used their cash to buy gold/properties/productX but at the end of the day somebody would have had to put the money in the bank! All the money would eventually have come to the bank one way or the other. And nobody would have been inconvenienced.
I feel you have not understood the purpose of this tedious move. People had started using money, bypassing the country's accounting and auditing system in order to stop paying their tax dues. The people who bought gold/properties etc. would have used their unaccounted money to buy those, and avoided paying tax. This is not the case of some one at the end of the value chain depositing money at the bank. By this move what has happened is that any body who had unaccounted money to buy gold/properties etc is now forced it to deposit it a bank. Since they made the deposits, they need to explain things (and pay tax+penalty etc.). You may have read in news papers that Rs.1080 crores is lying in the co.operative banks (which is outside the ambit of RBI) in Kerala alone. That is unaccounted money till today. That money could have been used for any illegal purpose across the country. The people had that money never paid any thing to the government. Now they have to answer some questions.

Last edited by sachinpk : 20th December 2016 at 20:35.
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Old 21st December 2016, 09:17   #1781
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

I saw Jaitley on the box yesterday. He did have a logic for this latest ruling. Seems that all avenues of old cash coming in legitimately, are closed. So what is (or rather should be) left are old notes. He does not want people making repeat transactions (what for?) and just adding to the rush, and also a one off input of the cash with you should do. It seems that the declaration, is more to try and catch repeat offenders.
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Old 21st December 2016, 13:39   #1782
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by sachinpk View Post
You are assuming that 100% of the black money has been converted to white.
Where did I say black money has been converted to white? I only said old curreny has been converted into new (people with say 10cr in old notes, have been able to get, say, 8cr in new notes thru back channels. It is still black money, that too in cash.

Quote:
With the crooks we have in India, that would flop the day it is launched. The black money hoarders had a reason to use Rs.500 & Rs.1000 notes to hoard money. It is the most easily available one, and also very easy to stock up. Now if these crooks are all told that in one year these notes would get invalid, what do you think they would do? They would dispose all these, and get the new set of notes. Surprise was most important factor here.

When the notes were invalidated, the black money hoarders were given only two choices (legal). Put these notes all through a proper banking channel, so that it gets accounted and new currency issued. Keep quiet about their stock pile of cash, and see them becoming paper after 30th Dec. This whole exercise was a "roll call parade" of currency notes. The black money hoarders had to do away with their stock pile of Rs.500 & Rs.1000. Yes, they did try many tricks but there again 100% protection is not guaranteed.
Flop in what sense. All my purpose is to get cash in the bank. That will happen with what I proposed isint it? I have no other motive with my scheme!
Now it can be made more effective by launching some more initiatives. For example, do away with all high value currency like 500/1000 notes. Have a financial penalty (say 5% or 10%) on high value cash transactions. Simplify IT laws - simply remove all exemptions and have only three slabs, say, 0-5L no tax, 5-10L 10%, 10-100L 20% and 30% for income above 100L. You can think of alternatives for these slabs and rates. But key word is no exemptions which simplifies tax filing a lot and also everybody should pay tax on their income - be it a teacher or a farmer or an engineer or a doctor or even the president! These are some of things that can show to us that govt means business when it utters the word "reform"

Quote:
Can you let us all know how you have successfully arrived at the conclusion that it is defeated? I am not being sarcastic here. The RBI itself has not completed their analysis and filed the report. People still have time till Dec 30th to deposit their money.
Thats a legitimate quetion and in my defense I was only replying to another member with the assumption that what he wrote is largely true. In fact, member of the ruling party and sitting MP, Dr. S Swamy had also tweeted about how easily money is being exchanged outside of the banking system! He wouldnt do that if it were not true.

Quote:

I feel you have not understood the purpose of this tedious move..That is unaccounted money till today. That money could have been used for any illegal purpose across the country. The people had that money never paid any thing to the government. Now they have to answer some questions.
There will be lot of unaccounted money even after 31st Dec. Or you dont think so?

Last edited by joslicx : 21st December 2016 at 13:42.
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Old 21st December 2016, 14:57   #1783
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Originally Posted by sgiitk View Post
I saw Jaitley on the box yesterday. He did have a logic for this latest ruling. Seems that all avenues of old cash coming in legitimately, are closed. So what is (or rather should be) left are old notes. He does not want people making repeat transactions (what for?) and just adding to the rush, and also a one off input of the cash with you should do. It seems that the declaration, is more to try and catch repeat offenders.
So far I have been an ardent supporter of demonetisation. But the latest circular (#59) is surely crazy. If the govt. had given time till 30th Dec then they should have stuck to the deadline and maybe then extended it by 5 days along with the new form and the additional questions and two strangers asking you odd questions.

But then looks like circular #60 this morning reverses #59 and now says that you can deposit money without the form and the two strangers asking questions, provided your account is KYC compliant.

Wishing you all a HAPPY NEW FEAR.
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Old 21st December 2016, 15:12   #1784
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by joslicx View Post
Where did I say black money has been converted to white? I only said old curreny has been converted into new (people with say 10cr in old notes, have been able to get, say, 8cr in new notes thru back channels. It is still black money, that too in cash.
Even though I am for this move, I have to agree with this point. The vast amounts that are being recovered are probably a mere drop in the ocean as far as total frauds are concerned.

I think GOI failed to asses significant amount of bankers going rouge and that is a bad thing to have happened. It just that we are a highly corrupt society - a mere dangling of notes and people seem to throw all the honesty in the dustbin.

The only other think left to do is to make the 2000 note useless again in some time and make stricter norms for deposit. I believe that 500 is the max currency that should be in circulation.
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Old 21st December 2016, 15:22   #1785
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by ptushar View Post
So far I have been an ardent supporter of demonetisation. But the latest circular (#59) is surely crazy. If the govt. had given time till 30th Dec then they should have stuck to the deadline and maybe then extended it by 5 days along with the new form and the additional questions and two strangers asking you odd questions.
Yes, the new norms for old currency deposits were uncalled for. There are only a few more days till the old currency goes totally illegal tender. Govt. should keep the deposit scheme as before.

However, there is a major reason why RBI or the Govt. tried to do this.

Seeing the increase in the number of deposits, RBI is certain that many people are depositing old currencies through multiple accounts and multiple times. After Dec 30th, all these will be withdrawn back from the accounts effectively replacing the old currency with new. Mind my words, you will see lot of withdrawals post Dec 30th if the withdrawal norms are eased.

There will be an increase in the queues at ATMs and banks too.
RBI wants that some or most black money should disappear or rather should not come back into the system. Every old note that comes back into the system will have to be replaced with new notes. This will only make the entire demonetization exercise that much more ineffective.

On the other hand, people with huge cash piles are finding ways and means to exchange their old notes to new ones and looking at the raids conducted by IT, many of them seem to have been successful in doing so.
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