[SchumiFan]

An alternate view? I am not exactly clear what this is trying to say but the reduction in circulation money is significant?

http://swarajyamag.com/politics/the-...-rbi-data-says

[StarrySky]

Originally Posted by gmhossain

Between Nov 10-27: (there were only 13 full banking days)

Deposit per day: 8.45/13 = 0.65 lakh crores per day

Between Nov 28-30:

Deposit per day: 2.55/3 = 0.85 lakh crores per day

Are they much different statistically? If you discount first few days when people queued up in banks mostly to exchange or withdraw, then average deposits per day would be similar in amounts as in later period. Secondly, many utilities may have done their month-end deposits in the later period.

The RBI data from previous week shows that nearly 5.45 lakh crores were already deposited by Nov 18. So, in 7 banking days from Nov 19-27 (I'm counting only the Sundays as non-banking days, correct me if I am wrong), an additional 3 lakh crores have been deposited.

If you compare the two releases from RBI - there is only less than 1000 crores exchanged at banks between Nov 19-27 compared to more than 33,000 crores between Nov 10-18. I think this is due to the exchange facility at banks being stopped on Nov 24, plus a result of the use of indelible ink. Even then, the deposits have gone down by more than 40%.

Yes, month-end deposits would have come in, but it cannot be entirely in old notes, especially if we assume based on the long queues at banks that a lot of people have already exchanged/deposited their old notes and they will pay for utilities in new notes.

Also, here is an interview with SBI MD, where he says that old note deposits are on downward trend.

Anyway better not to speculate and wait for the official data which should be out on Monday.

[Hayek]

I think 11 lakh cr is correct. But I also think anyone who thought demonetisation would create a windfall gain through cash not coming back in misses the real benefit of demonetisation. From an economic standpoint, cash not coming back and cash lying locked up in vaults are no different - they don't contribute to real money supply. And given the promise to pay underlying notes, I have always doubted the ability to book a gain from notes not tendered.

However, it is crystal clear that those with black money are incurring material costs. If they use the new disclosure scheme, they pay 50% tax upfront, and a further 10% through the loss incurred on the 25% deposited without interest, they thus pay 60% tax - and also have to pay tax on commensurate income in future. Others are incurring a cost of 40-50% by using gold etc to convert their cash. Small businessmen who evade taxes are hit by a 40-50% fall in volumes - and will likely have to bring business above board to resume activity. Yes, this requires future enforcement action (which will draw protests of tax terrorism). But when you have a nation full of criminal tax evaders, that is needed to bring about change. This will be a waste only if the Modi government does not follow up by prosecuting those who deposited cash without adequate explanation, and does not continue to make doing business with cash virtually impossible. This process will take the rest of his term - till then, the jury is out on whether this was worth it.

[sgiitk]

@Hayek; Let me add one small bit. Money sitting in sacks was not earning any return, so the 10% loss in Interest is purely notional at best. The chaps are thus losing 50%, plus 25% becoming illiquid for five years. In fact when I was in an MNC bank, some people (I think Tannery owners) were suggesting that the voluntary disclosure scheme should have been extended to overlap with the demonetization. So this is what we are getting.

[msdivy]

On Saturday morning, I landed at Citibank South End, Bangalore to deposit the notes I had acquired. This is what I saw (check the red line):


I scooted immediately. After driving around, finally, I found an SBM, which I was using many years back. I had stopped using the services because they were generally slow, no net banking facility, their printers were not working, sometimes their network was down, etc. Last time I went there was to get CTS 2010 cheques. Probably due to their poor service, the queue was less. The cashier was surprised I am depositing in an account which is not regularly used and wanted me to speak to the manager. I told him that coming here because the queue is less. Finally deposited amount. Now I have get this money out this bank via cheque.

Originally Posted by Zappo

Why not deposit in your account?

SBI refused to accept pre-2005 notes. Maybe the clerk there was bored. At SBM, they took it, no questions asked.

Originally Posted by nowwhat?

Today's Deccan Herald provides more details:

This looks like the tip of the iceberg and this same story across the country. Those have loads of black money seem to have no problem getting new notes

Originally Posted by gmhossain

If so happens, then RBI's liability will go up rather than going down!

There are many who waiting for the queue to reduce so that they can deposit their cash. If the amount crosses cash estimate, it would be facepalm on RBI.

What an effect, pity there was no one to get her money - Kanpur: Woman delivers baby inside bank while waiting in queue to get cash

Came last week but interesting read. Most economists have a poor opinion of demonetization, while most financiers have good opinion - Demonetization is a foolish step… The poor will suffer the most

[nowwhat?]

Originally Posted by msdivy

On Saturday morning, I landed at Citibank South End, Bangalore to deposit the notes I had acquired. This is what I saw (check the red line):

At a time like this, I'm real glad I don't deal with Citibank any more. With just two branches in Bangalore, the nearest one for me being the one on MG Road 7 kms away, it would have been a nightmare to deposit or withdraw money with them.

I am fortunate I have priority banking with Axis Bank these days, it hardly takes a few minutes for me to deposit or withdraw money and I can just walk there whenever I want.

[sdp1975]

Shops are unwilling to swipe for small amounts. My nearby grocery store was extremely reluctant to swipe for 45/-, quoting overheads and low margins , although he finally did as I was an old customer. He said that anything over 100/- would be swiped easily - anything less he wanted cash. The same shop asked for cash last week when my wife had a bill for 700/- and she had presented her card, and returned change for a 2K note ! I'm going to maintain a "khata" with him and pay him in cash when it reaches 2K.

The reality is that unless the cost of cashless transactions come down , there's no way they will become popular. Sure there's a cost of paper currency as well , but that's borne by the government and not by individuals.

EDIT : In some other news , there have been 2 disclosures amounting to 10,000 Cr ( source ) and 14,000 Cr ( source ) that are likely to yield nothing under the IDS. So the declarations under IDS come down to 40,000 Cr straight away from 64,000 Cr. There will be other cases of non-payment , locked in litigation etc, and the final amount realized will be a lot less. Similarly for the latest amnesty scheme.

[sgiitk]

@sdp1975; I can see the logic. But in the long term he will come to terms with and increasingly cashless society. Take Gurugram, even a chaiwala or paanwala is quite used to it.

[ajmat]

Originally Posted by nowwhat?

At a time like this, I'm real glad I don't deal with Citibank any more. With just two branches in Bangalore, the nearest one for me being the one on MG Road 7 kms away, it would have been a nightmare to deposit or withdraw money with them.

Citi's model is less branches and focus on greater online transactions. Banks avoid dealing with people face to face to reduce overheads. They are not set up to deal with demonetisation

Like you, I used an alternative bank. Citi is my salary account. I merely transfer to another Indian bank account + my wifes account and we withdraw.

[binand]

Originally Posted by sdp1975

The reality is that unless the cost of cashless transactions come down , there's no way they will become popular.

There is also the option of raising the cost of with-cash transactions. Some ideas would be:

- Bank charges for cash deposit and withdrawal from bank accounts.
- Low limits for these daily and monthly.
- Prohibit retailers from offering sales promotions (discounts, exchanges, lotteries etc.) to cash purchasers.

Etc...

[SmartCat]

Originally Posted by msdivy

On Saturday morning, I landed at Citibank South End, Bangalore to deposit the notes I had acquired. This is what I saw (check the red line): I scooted immediately. After driving around, finally, I found an SBM, which I was using many years back

Always a good idea to keep a savings account in atleast one old school dull public sector bank manned by bored looking employees.

[sdp1975]

Originally Posted by binand

There is also the option of raising the cost of with-cash transactions. Some ideas would be:

- Bank charges for cash deposit and withdrawal from bank accounts.
- Low limits for these daily and monthly.
- Prohibit retailers from offering sales promotions (discounts, exchanges, lotteries etc.) to cash purchasers.

Etc...

These are largely forced measures , and I have reservations on how effective in general forced measures are. If the underlying concern is with the transaction cost , that needs to be addressed to promote cashless transactions.

The trader told me that he pays about Rs 3 per Rs 100 for card transactions. For items like milk and bread with thin margins , he hardly has anything left at the end - that does explain his reluctance. For other items with higher margins , card payments will probably be a lot more acceptable. I hate paying using card at pumps , or at the irctc website for the extra card charges entailed - I can understand his point of view.

As far as the cash-vs-cashless debate is concerned , I think that for every argument in favor of cashless , there will be a counter argument in favor of cash. People do have underlying reasons for using cash or cashless . None is really better off than the other, and the choice should be left to users than being a forced one. Better literacy , internet penetration , infrastructure and lower costs will automatically promote cashless transactions.

[rahul_jo]

Let's take the complicated calculations and sophisticated terms out of the picture for a second. I am seeing all these popular economists talk about the possible impact this move will have on our country.

But everyone is massively missing the most basic element which keeps a country running and that is this - "HUMAN EMOTION". What exactly is a healthy economy? It's when person A freely spends money to buy something from person B. When there is a nice, healthy flow of money from one person to the next, the economy will naturally be a healthy one.

However, when person A is scared, he by default holds on to his money and thinks a lot before spending it freely. In that circumstance, money is not exchanging hands freely and as a result the economy slows down.

This move has inflicted a lot of uncertainty in the minds of the masses and as a result people are holding on to whatever they have. On top of this with the government threatening action on gold, property and sort of creating this atmosphere of "UNCERTAINTY" will cause people to hold on to their money reserves even more.

Those who're guessing that it'll be all fine within 50 days are highly mistaken. This will take a lot longer because fear won't turn into certainty overnight.
So once again, although there are many economists talking about pure numbers, we should never forget one thing - Numbers don't run us, we run the numbers.

[Samurai]

A single family declares 2 lakh crores of black money.

http://profit.ndtv.com/news/your-mon...3907?site=full

Obviously, it was not in cash format. What is forcing them to declare this amount which is in non-cash format? IT department has rejected the claim as fake. But what is the purpose of declaring a fake amount?

[LithiumSunset]

Originally Posted by sgiitk

@hybridpetrol; One problem in making all payments by debit cards is that there are myriad entries in the statement, which all have to be put into Tally if you must have closed accounting, followed by statutory audit. I am thinking of switching to credit cards, since then there is only one entry in the books.

No luck there either, sgiitk. I have to provide my accountant detailed breakup of credit card payments. So debit or credit doesn't matter as far as tally stuff is concerned.