Tag Archives: demonetisation

RBI hikes Repo Rate by another 50 basis points to 5.9%

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  • GDP for 2022-23 projected to grow at 7.0%.
  • Internet banking facility to be started for Regional Rural Banks’ customers.
  • Regulation of offline payment aggregators proposed.

Repo Rate hiked to 5.90%

The repo rate, the rate at which RBI lends money to commercial banks, has been hiked by 50 basis points again. Considering the prevailing adverse global environment, resilience in domestic economic activity, uncomfortably high inflation level, the RBI has hiked the policy repo rate by 50 basis points, to 5.40%.

Consequently, the standing deposit facility (SDF) rate stands adjusted to 5.65% and the marginal standing facility (MSF) rate and the Bank Rate to 6.15%. The Monetary Policy Committee has decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth, stated RBI Governor Shaktikanta Das.

The Governor’s address can be watched here:https://youtu.be/cb1it7TU8bk

RBI

Additional Measures:

The Governor announced a series of four additional measures, as given below.

1. Discussion paper on Expected Loss-Based Approach to be released for loan-loss provisioning by banks

Banks currently follow incurred-loss approach, where provisions are made after stress has actually materialized, this is to be replaced by a more prudent approach which requires banks to make provisions based on assessment of probable losses.

2. Discussion paper on securitization of Stressed Assets Framework (SSAF) to be released.

Revised framework for securitization of stressed assets was issued in Sep 2021, it has now been decided to introduce a framework for securitization of stressed assets, this will provide alternate mechanism for securitization of NPAs in addition to existing ARC route.

3. Internet banking facility for customers of Regional Rural Banks.

RRBs are currently allowed to provide internet banking facility to customers subject to fulfillment of certain criteria, to spread digital banking in rural areas, these criteria are being rationalized, revised guidelines to be issued separately.

4. Regulation of offline payment aggregators.

Online Payment Aggregators (PAs) have been brought under the purview of RBI regulations since March 2020. It is now proposed to extend these regulations to offline PAs, who handle proximity/ face-to-face transactions. This measure is expected to bring in regulatory synergy and convergence on data standards.

Growth Projection – 7.0% for 2022-23

The Governor informed that the central bank’s growth projection for the Indian economy for 2022-23 is projected at 7.0 per cent with Q2 at 6.3 per cent; Q3 at 4.6 per cent; and Q4:2022-23 at 4.6 per cent, with risks broadly balanced.

The growth for Q1 of 2023-24 is projected at 7.2 per cent.

Against the current challenging global environment, economic activity in India remains stable, stated the RBI Governor. “While real GDP in first quarter of this year turned out to be lower than expectations, it is perhaps the highest among major global economies”, he added.

Inflation

Inflation inched up to 7.0 per cent in August from 6.7 per cent in July, stated the RBI Governor. Global geopolitical developments are weighing heavily on the domestic inflation trajectory, he said.

The RBI Governor stated that monetary policy has to carry forward its calibrated action on policy rates and liquidity conditions consistent with the evolving inflation growth dynamics. It must remain alert and nimble, he stated.

Read the full statement of the Governor here; Statement on Development and Regulatory Policies here; and Monetary Policy Statement here.

Also Read:

RBI Silent on Rs.200 New Currency Notes in Print

Festive Season: Fixed Deposit rates hiked by banks

Interest rates on small savings schemes remain unchanged

NO CASH in ATMs? What’s Behind Sudden ‘run’ on Banks?

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It is more than 18 months since the whole country’s citizens were paraded on the streets by the Demonetisation 2016 and the days are here again with No Cash board greeting on ATMs, especially in non-BJP ruled states of Andhra Pradesh, Telangana and West Bengal. Karnataka facing elections next month has been partly spared from the cash crunch.

West Bengal Chief Minister Mamata Banerjee on Tuesday questioned whether a "financial emergency" was subtly imposed in the country. "Seeing reports of ATMs running out of cash in several states. Big notes missing. Reminder of #DeMonetisation days. Is there a Financial Emergency going on in the country? #CashCrunch #CashlessATMs," Banerjee tweeted.

Even BJP-ruled Madhya Pradesh, Maharashtra, Gujarat and coalition government in Bihar have reported cash crunch on Monday but Union Finance Minister Arun Jaitley categorically denied the reports of any cash crunch. "There is more than adequate currency in circulation," he reiterated, saying RBI figures show that Rs 18.17 lakh crore was in circulation.

Severe cash crunch was faced in India following Nov. 8 ban on high-value currency notes. Almost the entire country was seen in big queues before the banks, and the sordid saga continued at a stretch for 15 days.

However, this time, reports say that the cash crunch was a knee-jerk reaction to the latest Financial Resolution and Deposit Insurance (FRDI) Bill, being tabled in parliament. Rumours are widespread that it affects deposits if a bank goes bankrupt, though government has clarified that it is not the case.

In some states, this has led to a run on banks from where people are withdrawing deposits and collecting cash, especially, in Rs.2000 notes so as to hoard it easily at home.

Already huge bank defaults in Punjab National Bank, ICICI bank scam, and evasion of thousands of crores by big business magnates are making round every day in the country, leading to loss of people’s faith in the banking system. As of March 2018, bank deposits grew at 6.7 percent compared to 15.3 percent in 2016-17.

Opposition has described it as a "deliberate move” of the government. “News reports say that ATMs around the country are running of out of cash. Is it just gross mismanagement by the Modi Govt or is this a deliberate move? The people of the country forced to suffer even after 1.5 years of demonetisation show the acute failure of BJP government,” tweeted Congress.

Impact of Demonetisation on Black Money, Widening of Tax Base and Direct Tax Collections

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The Government of India launched a concerted drive against black money with Demonetisation being an important step in that direction. Among the main objectives of Demonetisation was the flushing out of black money and also conversion of the non-formal economy into a formal economy to expand the tax base. The impact of Demonetisation on black money, widening of tax base and Direct Tax Collections is summed up hereunder:

A. Impact on black money:

Quantum jump in Enforcement actions based on Demonetisation data:

Searches

· 158% increase in number of searches (from 447 to 1152 groups)

· 106% increase in seizures (from Rs. 712 crore to Rs.1469 crore)

· 38% increase in admission of undisclosed income (from Rs.11,226 crore to Rs. 1,54,96 crore)

Surveys

· 183% increase in surveys (from 4422 to 12520)

· 44% increase in undisclosed income detected (from Rs. 9654 crore to Rs. 13920 crore)

Operation Clean Money:

The Income Tax Department launched ‘Operation Clean Money’(OCM) on 31st January, 2017 to analyse the data of the persons who deposited large sums of cash and whose returns of income were not in sync with such deposits.

Phase 1:

· In the first phase of OCM, 18 lakh suspect cases were identified through use of data analytics where cash transactions did not appear to be in line with the tax profile of depositors.

· Online verification in these cases was enabled and done in a record time of 4 weeks.

· The success of the first phase was also attributable to the massive taxpayers’ awareness and media campaigns on Operation Clean Money launched by the Department.

· The scale of the Operation may be gauged from the fact that response of 9.72 lakh persons in respect of 13.33 lakh accounts involving cash deposits of around Rs.2.89 lakh crore, as per pre-defined parameters on sources of the cash deposits was captured by the Income Tax Department within a short span of 3-4 weeks. Online queries were raised in more than 35000 cases and online verification was completed in more than 7800 cases.

Phase 2:

· The Operation Clean money has since moved into the next phase that includes enforcement actions in high risk cases, taxpayer engagement through a dedicated website in medium risk cases and close monitoring in low risk cases.

· The high, medium and low risk cases have been identified through use of advanced data analytics, including integration of data sources, relationship clustering and fund tracking.

· The exercise has also unearthed large number of persons and clusters having suspect transactions. These include about 14,000 properties of more than Rs.1 crore each where persons have not even filed Income Tax Returns. The investigations are in progress.

B. Impact on Widening of Tax-base:

· The number of e-returns of Individual taxpayers filed till 5th August, 2017 (due date of filing) increased to 2.79 crore from 2.22 crore returns filed during the corresponding period of last year, registering an increase of about 57 lakh returns (25.3%). This shows marked improvement in the level of voluntary compliance as a result of action taken by the Income Tax Department on the basis of data of cash deposits in the wake of demonetization.

· The total number of all returns (electronic + paper) filed during the entire Financial Year 2016-17 was 5.43 crore which is 17.3% more than the returns filed during FY 2015-16.

· For FY 2016-17, 1.26 crore new taxpayers (return filers + non-filers making tax payments) were added to the tax base (till 30.06.2017).
C. Impact on Direct Tax Collections:

The effect of Demonetization is also clearly visible in the growth in Direct Tax Collections. Collection of Advance Tax under Personal Income Tax (i.e. other than Corporate Tax) as on 05.08.2017 showed a growth of about 41.79% over the corresponding period in F.Y. 2016-2017. Collection of Self-Assessment Tax under Personal Income Tax showed a growth of 34.25% over the corresponding period in F.Y. 2016-2017.

Aadhar Card Enrolls 111 Crore Out of 125 Crore Indians

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With 68th Republic Day celebrated, India can bask upon its Unique Identification Authority of India (UIDAI) or Aadhaar Card that has covered 111 crore of the 125 crore population in the country.

Ushered in 2009, the Aadhaar card has emerged as the world’s largest and unique biometrics based identification programme with a real time online authentication infrastructure which was recognised as a highly potential tool for financial inclusion in UN Report on World Social Situation, 2016.

Though a Manmohan Singh government’s initiative, the Aadhaar Card remained politically neutral and was adopted by the successive government to take it to the current level of instant identification online, that was used by private sector too to cite Reliance Jio recently.

“It has come a long way in less than six and a half years of its journey from being a unique identification programme to transform itself into a critical development tool of public–centric good governance and targeted delivery of services/benefits/subsidies,” said Ravi Shankar Prasad, Minister of Electronics & IT and Law & Justice.

UIDAI has 28,332 Permanent Enrolment Centres where people may go for enrolment, updation and other Aadhaar related services. UIDAI has a capacity of generating and dispatching over 15 lakh Aadhaars every day.

“Aadhaar which began in its first phase as a unique identification programme with an authentication infrastructure grew into its second phase as the tool of public sector delivery reforms by becoming the permanent financial address of the Aadhaar holder;and as a tool for de-duplication, e-KYC anddirect benefit transfer in its third phase, it started contributing to the management of the fiscal budget by generating saving to the Government exchequer to the tune of 36,144 crore in a few welfare schemes only in just two years,” he said.

“Now in its fourth phase, with demonetisation and Digital India drive towards less-cash economy, Aadhaar is all set to be the game changer with Aadhaar Pay – a non-traditional digital payment system without a need of card, pin, password or mobile with the consumer”, he added.

Aadhaar Enabled Payment System (AEPS) on which 119 banks are live, more than 33.87 crore transactions have taken place. While only 7,406 AEPS points were available in May 2014, currently over 1,65,000 agents are available in the villages.

Secondly, the opening of bank accounts with Aadhaar eKYC, in which 97 banks are live and 4.47 crore bank accounts have been opened till now, which was only 1 lakh in May 2014.

Thirdly, Aadhaar Payment Bridge (APB) or Direct Benefit Transfer (DBT), has shown considerable growth in the past two years at 167.36 crore worth Rs.44,967 crore which has risen by ten folds in value since 31st May 2014 (7 crore transactions, worth Rs.4,000 crore).

Fourthly, with the Aadhaar Pay, soon to be launched, any person with his Aadhaar number linked to Bank account, can make and / or receive payment, with his thumb impression alone.

Finance Ministry Denies Links With Tainted UK Note Printing Company

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Following reports in sections of media stating that the Union Government has compromised the national interest by collaborating with a tainted UK based Note Printing Company, a statement from the Ministry of Finance denied that the company is in any way involved in printing new currency notes.

A report in November by Sabrangindia.com alleged that the blacklisted company, De La Rue (now renamed KBA Giori) for its reported involvement in the Panama papers scam, was still supplying paper for new notes. It was blacklisted following an investigation by the CBI in 2011 for its alleged role in dealings of counterfeit currency.

Clarifying on such reports, the ministry said, the UK firm had been supplying bank note paper till 2010 and as per the decision taken in 2013, the company was permitted to supply a security feature for bank notes till December 2015.

No fresh contract has been given to this company by the Government during the last three years, it said. The Security Clearance for this company has been withheld by the Ministry of Finance, Government of India and hence no fresh orders have been placed with the said company since 2014.

However, the company has applied for setting-up a factory in India and no action has been taken on their application, it added.

Demonetization a Gamechanger, Says Law Minister

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Demonetization has resulted in sharp decline in terror funding, hawala trade, supari killings and human trafficking of young girls as sex slaves, mainly from Nepal and the North East, said Union Law and IT Minister Ravi Shankar Prasad on Thursday speaking at a seminar.

Addressing the seminar, jointly organized by the Press Club of India, Indian Women Press Corps and the Supreme Court Lawyers’ Conference, he said that a new India, much stronger will emerge, transcending the barriers of caste, creed and religion with the November 8 decision of scrapping old Rs.500 and Rs.1000 notes.

Indicating that the government would not hesitate to take steps to widen the tax base, he said that development was not possible without enlarging the tax kitty as there was “only about Rs.5 lakh crore in the kitty of Finance Minister for development” before the demonetisation move, which he said would grow rapidly now.

“Every government comes and goes. Our government is transformative government and tools of technology are actively aiding the good governance. There are 110 crore Aadhar cards and 104 crore mobile connections today. Digital governance means faster delivery and even poor and illiterate people in rural areas are showing a new confidence in embracing the digital technology which has given a new vision of hope,” the Law and IT Minister said.

The Union Minister for Electronics & Information Technology and Law & Justice Ravi Shankar Prasad addressing the seminar jointly, organised by the PCI, IWPC and the Supreme Court Lawyers Conference, in New Delhi on January 12, 2017. (PIB Photo)

He also cited examples of Imran Khan, a mathematics teacher from a school in Alwar, Rajasthan whose mobile apps had benefitted 40 lakh children and a woman Satama Devi, a beedi worker from Telangana who had learnt how to use Skype to talk to her grandson in Dubai. “People like these are change agents. They believe in this new fast emerging India,” he noted.

The minister said that Aadhar enabled bank payments through smart phone would prove to be a “game changer” and a tool of empowerment. He said that out of 125 crore people only 3.7 crore pay taxes and 99 lakh file Income Tax returns but have no taxable income, two crore people show annual income of Rs. 6 lakh and only 24 lakh have an annual income of Rs. 10 lakh and above. The Law and IT Minister said that a panel, led by Justice Sri Krishna, had been set up to give a report within three months on making India a hub of arbitration.

Former Chief Justice of India M. N. Venkatachaliah who presided over the seminar on “Fundamental Duties and Economic and Judicial Reforms” stressed upon social evolution and education of young minds who can build a better India.

E-Tourists Double in Dec. 2016 Despite Demonetisation

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The number of foreign tourists who arrived in India using e-visa doubled to 1,62,250 in December 2016 compared to 1,03,617 during the month of December 2015, registering a growth of 56.6 percent, though expectations were that the demonetisation would have affected the overall tourism sector in November and December 2016.

Britain (22.4%) continues to occupy top slot followed by USA (16.4%) and Russia (7.7%) in the order of foreign tourists who availed e-tourist visa facility last month, said the latest figures released by the government, without pondering on the demonetisation issue that rocked the whole nation. The facility of e-Visa has been made available to the citizens of 161 countries, arriving at 16 International Airports in India.

Some of the figures speak for themselves for the increase in tourists in December 2016:

In the month of December 2016, a total of 1,62,250 foreign tourists arrived on e-Tourist Visa as compared to 1,03,617 during the month of December, 2015 registering a growth of 56.6%.

In the calendar year from January to December 2016, a total of 10,79,696 tourists arrived on e-Tourist Visa as compared to 4,45,300 during January-December 2015, registering a growth of 142.5%.

The high growth may be attributed to introduction of e-Tourist Visa for 161 countries as against the earlier coverage of 113 countries, said a government statement.

The percentage shares of top 10 source countries availing e-Tourist Visa facilities during December, 2016 were:

UK (22.4%),
USA (16.4%),
Russia (7.7%),
China (5.3%),
Australia (4.6%),
France (4.1%),
Germany (4.0%),
South Africa (3.7%),
Canada (3.7%) and
Republic of Korea (2.0%).

The percentage shares of top 10 ports in tourist arrivals on e-Tourist Visa during December, 2016 show that the national capital still leads in attracting the tourists or being the first point of visit to the country, followed by Mumbai and Goa. All other destination airports still attract tourists in sigle digit percentage points.

New Delhi Airport (36.6%), Mumbai Airport (23.1%), Dabolim (Goa) Airport (13.6%), Chennai Airport (6.0%), Bengaluru Airport (5.1%),Kochi Airport (4.7%), Kolkata Airport (2.5%), Hyderabad Airport (2.4%), Trivandrum Airport (1.9%) and Ahmadabad Airport (1.7%).

What President of India Said on Demonetisation?

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In his New Year message to Governors and Lt. Governors, President Pranab Mukherjee on January 5, 2017 clearly indicated his unhappiness over the slowdown it will have on Indian economy though he termed it temporary. The message is a clear signal that the President, also former finance minister himself, is unhappy at the prolonged impact on people, who are not soldiers but citizens of the country.

He gave an advice to the centre over its adventure towards demonetisation.

Poor people need to fill their stomachs first and then roped in our long march towards transition to entrepreneurial approach. In his refined words, it read:  “We all will have to be extra careful to alleviate the suffering of the poor which might become unavoidable for the expected progress in the long term.”
The President said while he appreciates the thrust on transition from entitlement approach to an entrepreneurial one for poverty alleviation, he is not too sure that the poor can wait that long. “They need to get succour here and now, so that they can also participate actively in the national march towards a future devoid of hunger, unemployment and exploitation,” he said.
In addition, the President pondered over the state assembly elections in as many as seven states in 2017 as the dates for elections in five states have already been announced. “Elections reflect the attitudes, values and beliefs of the people towards their political environment. They symbolize the sovereignty of the people and provide legitimacy to the authority of the government. They also serve the purpose of regulation of public policies and mobilization of public opinion,” he noted hinting at the outcome in these elections would be the vox populi on demonetisation.
The President advised Governors and Lt. Governors to play an important role in easing the tensions in the society. Goodwill must prevail between different communities. “In a pluralistic democracy like ours, tolerance, respect for contrary views and patience are a must. These values have to be preserved. The multiplicity in culture, faith and language is what makes India special. Governors/Lt. Governors can, through their calm influence, inculcate amongst the citizens of their state this fundamental ethos of our civilization,” he said.

IT Raids Unearth Rs.2,600 Cr Since Nov. 8

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The Income Tax Department has carried out investigations since the de-monetisation of Old High Denomination (OHD) currency announced by the Government on 8th November, 2016 and unearthed  Rs.2,600 crore in 291 cases across the country. In addition, open enquiries have been effected in more than 3,000 cases.
Approximately Rs. 393 Crore including Rs. 316 Crore cash and Rs. 77 Crore worth of jewellery has been seized. Of the cash seizure, about Rs. 80 Crore is in new currency. As a result of these investigations, approximately Rs. 2600 Crore of undisclosed income has been admitted by the taxpayers.

The success of the Department in unearthing undisclosed incomes and detecting large scale malpractices is due to its focused enforcement actions based upon high quality data analytics under various categories thereby identifying and prioritizing high risk persons/groups.

This, coupled with the professional manner of conducting the investigations in a swift and confidential manner, has helped the Department make an impact in a short time.

Ministry Asks Banks to Show New Currency Deposit Receipts

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The Ministry of Finance, Government of India through its Department of Financial Services(DFS) has asked all the Public Sector Banks(PSBs) and the Indian Bankers Association (IBA) to ensure hundred percent(100%) that deposits of new currency is properly reflected in the customers’ counterfoils.

In a letter addressed to all the Managing Directors (MDs) & Chief Executive Officers (CEOs)/Chairman cum Managing Directors (CMDs) of PSBs and Chairman, IBA, the DFS has stated that maintenance of records regarding deposit of SBN and Non-SBN, as the case may be, is essential both in the bank record as well as the customer’s record.

The letter further states though most banks providing correct information to the customers yet to ensure that it is done in 100% of cases without fail, all the bank branches in the country be alerted to reflect correctly the cash deposit in old and new currency and inform the customers about the same.

The Ministry has asked the MDs &CEOs/CMDs of PSBs and Chairman, IBA that this must be followed scrupulously and any deviation in this regard has to be prevented and if noticed, dealt with firmly and immediately.

The letter further states that to educate the public, banks may clearly display a prominent sign (including in the local language) in their respective branches requesting their customers to fill-up deposit slips clearly indicating old and new currency and the denomination of the notes..

The DFS has asked all the MDs &CEOs/CMDs of PSBs and Chairman, IBA to consider this urgently and action taken in this regard be reported by 16.12.2016.

The Ministry also appreciated the role played by the banks post-demonetisation especially when the old currency was accepted and till 24th November, 2016, when exchange of old currency to specified limit was also permitted.

Demonetisation: Supreme Court Warns Govt to End Cash Crisis

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The Supreme Court on Friday warned the government to find ways to end the cash crisis as people standing in long queues for hours every day may turn violent anytime leading to anarchy.

Brushing aside the government contention, the court made it clear that “It is a serious issue.” Since it affects the entire population, it said, “You cannot deny there is a serious problem. There could be riots.”

The bench consisting of Chief Justice TS Thakur and Justice AR Dave retorted to attorney general Mukul Rohatgi’s plea seeking directive to lower courts to stop hearing cases related to demonetisation. Once the high courts take up legal suits, millions of suits will move the courts seeking intervention to redeem their money.

The bench took exception to limit the daily cash exchange limit to Rs 2,000, after promising to increase it to Rs.4500 creating suspicions in the minds of people about the government’s ability to exchange their money in time.

“The government just did not have the capacity to print new currency notes. They should have taken this into account and taken steps to avoid putting people into untold harassment,” said petitioners.

“Daily labourers are not getting paid, tea garden workers are not getting their salaries, people in rural areas have to walk long distances to reach banks and ATMs only to be told that these have run out of cash. It is a serious situation. Transporters are suffering. Trucks are standing idle without cash. India is a cash-based economy and the government has hurt it badly by freezing cash circulation,” senior advocate Kapil Sibal said in the Supreme Court on Friday on behalf of the petitioners who have questioned the legality of demonetisation.

The next hearing will be on November 25.