Suggestions for Moving towards Cashless Economy

According to RBI, 60% of the Rupees 500 and 1000 notes have already been deposited in the banks. So the Government's calculation of blackmoney holders being caught is not going to be fruitful. Realising this, Modi Government has called for people to move into a cashless or e-payment mode. However, there is precious little that the Government has done till date to move more people into the e-payment/e-wallet mode.

So what should the Government do now?

PayTM has already launched massive advertisements featuring the Prime Minister. This is the second company after Reliance Jio to feature the PM in its advertisement. No company can do it without the permission of the Prime Minister. So I am sure the PM has given his blessings. Now the question is why the Prime Minister who always talks about swadeshi is promoting a company where the Chinese hold 40% shares? Unfortunately, that is likely to remain mystery.

Nevertheless, apart from PayTM ie promoting a private company the Prime Minister or his Government hasn't done much.

UPI:
The pilot for UPI or Unified Payments Interface was launched in April 2016 by the then Governor of RBI Dr. Raghuram Rajan, which powers multiple bank accounts into a single mobile app. Since August 2016 it is available for use. However, not much publicity has been done for popularising UPI. Details about UPI can be found here: http://www.npci.org.in/UPI_Background.aspx

The Modi Government should immediately recruit atleast 1 crore people for atleast one year to move from door to door and popularise UPI app among people. This will also result in sudden spurt in job creation as well as adoption of the UPI app among people. The amount of money required for recruitment as well as conducting this year long promotion can be budgeted.

Politically it will help the Government as the youth will be very happy to get a job as well as act as a change agent.

Bank Accounts for all:
The other important thing that the Government can do is that Government should make it mandatory for people to open a bank account for each child. The moment a child is born, a bank account should be opened and this process should be linked with the birth certificate registration and make it seamless. With Birth certificate and bank account an Aadhar number should be also created. So this will lead to complete documentation of all citizens and any benefits transfer can happen through the bank accounts. This will go a long way towards making our economy cashless and transparent.

Hope someone can whisper these suggestions in Mr. Narendra Modi's ears.

Compensating citizens for Demonetisation hardship

Govt. should give Fixed Deposit rates and a 100% extra for all money in banks to individual account holders

The Government's unprecedented action of declaring the Rs. 500 and Rs. 1000 as illegal and the resulting chaos continues unabated. Everyday, the National Media - which is mostly Delhi centric - comes to know a little bit more about the hardship of people in farflung areas and tells us how devastating this has been for many people.

The Government is however happy. The banks are also happy. Why won't the banks be happy?

For too long the banks had hidden their NPAs (Non Performing Assets) from their accounts. Industrialists have been taking loan after loan, often refinancing the old loans with even bigger new loans. The previous RBI Governor Shri Raghuram Rajan, who had famously predicted the 2008 economic collapse, had forced the banks to come clean on their bad loans or NPAs.

The Gross NPAs of banks in March 2016 was 7.6%. In rupee terms the Gross NPAs stood at 5,94,929 crores at the end of March 2016. RBI Projection says this is expected to rise to 8.5% by March 2017. And it had also said that if the "macro situation deteriorates in the future, the gross NPA ration may increase further to 9.3% by March 2017".

The public sector banks, atleast a majority of those, are like personal fiefdoms of the Chairman of the bank along with a coterie of politicians. Not many can question them. For too long this nexus between bankers, industrialists and politicians had continued till Shri Raghuram Rajan as RBI Governor decided to bring this issue to public. Shri Raghuram Rajan forced the banks to make 15% provisions for restructured loans. Now that the NPAs have been made public and are reflected in the balance sheets of the banks, they required massive recapitalisation. So there were some demands of recapitalisation of banks to the tune of 70,000 crores. However, given the scale of NPAs, that was too less.

The withdrawal of Rs. 500 and Rs. 1000 notes and people being forced to deposit their own money, banks are now flush with funds with several lakh crores of money already deposited. So a few banks have even announced reduction in their deposit rates by .15 to .25%.

Unfortunately, it is a double whammy for the common man. His/her money is forcibly deposited in the banks and only partial withdrawal of upto Rs. 2000 is possible per day. So even legitimate cash kept by people is now tied up in banks. It is like a forced fixed deposit without any extra interest rate.

If the cash deposited by the public is unaccounted for then the public have to pay income tax, as well as some 200% penalty. Though under what section that penalty percentage will be applied is not known.

Government is expected to be for the people and Government has to be seen as "just" and "fair". Unfortunately, in this entire #Demonetisation episode the public has been brutally hit. So it would be fair for the Government to announce that all deposits in the banks will earn an interest rate equal to annual fixed deposit rates and a special 100% extra on amount of hardship to the common man. That would be too low and too less because this demonetisation exercise has taken more than 50 lives and have resulted in massive loss of legitimate business.

Unfortunately, this Government only demands sacrifice from people and doesn't appear to be concerned for the "sacrifices" and doing even a small bit to alleviate their stress.

Read BlackMoney Politics & Way Forward: http://arjunaubacha.blogspot.in/2016/11/blackmoney-politics-way-forward.html