[LithiumSunset]

Originally Posted by sdp1975

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.

Well, the former finance minister made the same claim too, without reading the clarification from the government that these sums (14K crore and 200K crore) had not been included in the 70 odd K declarations figure on the IDS.

But I agree that the cost of card transactions has to come down. And it will.

[joslicx]

Originally Posted by 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.
.

Well, dont we usually round off small change when buying stuff? For example, when my wife buys vegetables from the local shop outside our apt she easily negotiates about 10% off the price and on top of that if lets say the bill is 138 rupees then she pays 130 and usually the vendor is OK with it. I have seen lot of people do that all my life, in small cities where I grew up, in Delhi where I lived earlier or here in Bangalore where I live now. In contrast, at MK Ahmed stores here where I sometimes buy using card, there is no such negotiation and I pay full amount, if its 138 I pay 138!

If you ask me, this "overhead" or the cost of using card might actually be lesser than what the small shops usually forego in round-offing, if I may use the word. The real reason probably is, they just dont want to report their actual income to the tax authorities (which they will have to, if the transactions were all in digital)

[binand]

Originally Posted by sdp1975

These are largely forced measures , and I have reservations on how effective in general forced measures are.

On the contrary, it is my opinion that if the intention is for the general population to adopt measure X, then not only should there be positive incentives for adopting X but there must also be negative incentives against adoption of alternatives to X.

To take a Bangalore example: if we want people to leave their private vehicles at home and take public transport en masse, then BMTC must not just increase the frequency, reach and comfort levels of their buses but must also lobby for things like congestion charges, increased cost of parking, lower priority for private vehicles on roads etc. as well.

[msdivy]

Originally Posted by sdp1975

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.

Currently cashless payments, like PayTM, UPI are still in 1.0 version (PS: I haven't been able to use UPI at any merchant location till now). It will be more useful when they reach at least 3.0 or 4.0 versions. Virtual currencies like bitcoins are ahead in this respect. Since those are decentralized, no Government or central bank would like bitcoins.

Originally Posted by sgiitk

Why are interest rates dropping? The banks are flush with money so will naturally pay lower interests on deposits. Borrowing rates will also follow suite, with rate cuts.

I have doubts on the lending rates dropping. The deposits mopped up by demonetization is a liability to banks. They have to return to the account holders after Dec 30. They cannot use for any other purpose. So the lending rates won't drop.

[binand]

Originally Posted by msdivy

I have doubts on the lending rates dropping. The deposits mopped up by demonetization is a liability to banks. They have to return to the account holders after Dec 30. They cannot use for any other purpose. So the lending rates won't drop.

There are two assumptions you make, that are not true:

1. You are assuming all the deposits went to savings accounts. At least some part of it would have been made into FDs etc.

2. Even the part that go into savings accounts are employed by the banks to generate revenue in the near term (in the call money market, as working capital loans etc.).

The thing is, banks have to pay interest to depositors, even if it is in savings bank accounts. They can earn revenue only if they lend the deposits so raised. That is, in the loans market there is now higher supply; so to increase demand to match supply the price (interest rate) has to drop.

Here is how it plays out: Fresh deposits are made to disturb equilibrium, central bank lowers interest rates to raise debt demand, deposit rates also go down correspondingly, some deposits are withdrawn due to lower interest rates (switch from investment basket to consumption basket), this stimulates demand in economy, entrepreneurs seek debt funding to increase production, new equilibrium is reached.

[spookey]

Ground reality is most of the businessmen have successfully converted their stash atleast in Mumbai only ones facing problems are those with 50 Cr + stash.

[sgiitk]

Originally Posted by msdivy

Currently cashless payments, like PayTM, UPI are still in 1.0 version (PS: I haven't been able to use UPI at any merchant location till now). It will be more useful when they reach at least 3.0 or 4.0 versions. Virtual currencies like bitcoins are ahead in this respect. Since those are decentralized, no Government or central bank would like bitcoins.

I have doubts on the lending rates dropping. The deposits mopped up by demonetization is a liability to banks. They have to return to the account holders after Dec 30. They cannot use for any other purpose. So the lending rates won't drop.

Agree on UPI. Each bank has its own, defeating the purpose.

Lending rates have been frozen for now by the 100% Incremental CRR. You have the money but cannot use it. Let us see on the 7th/9th.

[sukhoi30]

Originally Posted by spookey

Ground reality is most of the businessmen have successfully converted their stash atleast in Mumbai only ones facing problems are those with 50 Cr + stash.

Yes, despite all the Govt. efforts a small window was still left open for several unaccounted/black money to get converted to white. The exchange mechanism was a big failure.

In hindsight, at the time of announcement, if the following were done, then a lot of such unaccounted money could not have been converted.

1. The Rs. 1000 note should been banned outright with a provision to only deposit them in bank accounts.
2. Rs. 500 notes should be exchanged but only around Rs. 2000 worth of it per person per day.
3. Exchange of Rs. 500 notes should have been allowed only for 15 days post demonetization.
4. At toll booths, Rs. 500 should have been legal tender only if the toll rate is above Rs.100.
5. At airline ticket and rail tickets centers, Rs. 500 should have been made legal till Dec 30th, but with a rider of no cancellation.
6. All cooperative banks should have been allowed to exchange Rs. 500 notes only if the person is a member or has an account in that bank. Again up to a limit of Rs. 2000 per person per day to be maintained.

Its too late to say all this but would have controlled the queues. The indelible ink idea should have been thought out much earlier. Even now, I think this exchange of old currency should stop immediately, indelible ink or not. This is the only way to stop the circulation of the old currency notes.

[vinit.merchant]

Originally Posted by 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?

This is done to become a front for others holding benami wealth, thereby helping them remain benami. By doing this, the said person declaring the black money (in this case the family) usually keeps a cut for themselves from the leftover.

[earthian]

Originally Posted by sukhoi30

In hindsight, at the time of announcement, if the following were done, then a lot of such unaccounted money could not have been converted....

If you don't mind me saying so, the above would have only stopped the small hoarder: Parchuran. The big ones would have still got away. What hindsight shows is:

1. Ensure that conversion to Gold, real estate, luxury goods was prevented by preempting disallowance of any increased cash sales.
2. Preempting misuse of Jhan Dhan accounts by not declaring that deposits till Rs 2.5 lacs would not be investigated.
3. Bringing the IDS schemes from the beginning.
4. Ensuring deterrence and compliance by increased investigation and putting a few behind bars.

The above measures would have hit the medium/big hoarder. The very big ones? I have no idea. They would probably cut their losses and moved on, to make it up again. They would anyway have only about 6% of their black wealth in cash. Rest would be in precious metals, property, share bazaar and ploughed back into their businesses via Mauritius, Cayman islands and such. So they lost 6%. Big deal.

[poloman]

Originally Posted by sukhoi30

Yes, despite all the Govt. efforts a small window was still left open for several unaccounted/black money to get converted to white. The exchange mechanism was a big failure.

In hindsight, at the time of announcement, if the following were done, then a lot of such unaccounted money could not have been converted.

1. The Rs. 1000 note should been banned outright with a provision to only deposit them in bank accounts.
2. Rs. 500 notes should be exchanged but only around Rs. 2000 worth of it per person per day.
3. Exchange of Rs. 500 notes should have been allowed only for 15 days post demonetization.
4. At toll booths, Rs. 500 should have been legal tender only if the toll rate is above Rs.100.
5. At airline ticket and rail tickets centers, Rs. 500 should have been made legal till Dec 30th, but with a rider of no cancellation.
6. All cooperative banks should have been allowed to exchange Rs. 500 notes only if the person is a member or has an account in that bank. Again up to a limit of Rs. 2000 per person per day to be maintained.

Its too late to say all this but would have controlled the queues. The indelible ink idea should have been thought out much earlier. Even now, I think this exchange of old currency should stop immediately, indelible ink or not. This is the only way to stop the circulation of the old currency notes.

These are all misconceptions peddled by some so called financial experts. The total value of over the counter exchange was only around 50000Cr. Which is kind of a small drop in the ocean or around 3-4% of the total money in circulation in 500 and 1000 notes. If you see the deposit figures, you will understand what actually is happening. Bulk of these notes are getting deposited in banks. At last count it was around 10L crores.People with cash may be thinking that this is the safest thing to do as of now and will see the repercussions later. Now this may or may not get laundered depending on the detection skills of IT guys. People are saying once you deposit money in bank it will become white, this is totally false. If they are unable to disclose the source, it will be taxed at 80% if IT detects it or 50% if they declare voluntarily. Assessment will happen by end of this financial year and then only a clear picture will emerge. Right now only 20% cash has flown back to the system. Rest is in safe in bank vaults.

What surprises me is the eagerness shown by some quarters to paint this entire scheme a big failure even before the Dec deadline. I simply cannot understand the motivation behind that.

[earthian]

Originally Posted by vinit.merchant

This is done to become a front for others holding benami wealth, thereby helping them remain benami. By doing this, the said person declaring the black money (in this case the family) usually keeps a cut for themselves from the leftover.

I think we are missing the point here and jumping the gun. Black wealth declaration is not on the cards, yet. Black money is. Hence cash. In order to declare Rs13800 cr or Rs 2,00,000 cr ( Cannot comprehend what size room would be required to stock these notes); one must have the money (cash) in possession first. Isn't that right?

[Samurai]

Originally Posted by vinit.merchant

This is done to become a front for others holding benami wealth, thereby helping them remain benami. By doing this, the said person declaring the black money (in this case the family) usually keeps a cut for themselves from the leftover.

How does 2 lakh crore remain benami? With that kind of amount declared, IT department will camp in your home and would want to know the source of every income.

Originally Posted by earthian

I think we are missing the point here and jumping the gun. Black wealth declaration is not on the cards, yet. Black money is.

Declaration scheme is for wealth, not just cash. You can declare gold, land, and other assets.

[sachinpk]

Originally Posted by poloman

TBulk of these notes are getting deposited in banks. At last count it was around 10L crores.People with cash may be thinking that this is the safest thing to do as of now and will see the repercussions later. Now this may or may not get laundered depending on the detection skills of IT guys. People are saying once you deposit money in bank it will become white, this is totally false.

The bolded part is missed by many. The impression is that once the money reaches the bank, it is all legal & white. Well, it is just the opposite. The people who put money in the bank account have now exposed themselves . Now it is with this official data, the IT folks would start their questioning.

But I must say that looks like the government did not expect so many people to deposit the money in the banks. They (the government) would have thought that the black money hoarders would just burn their ill-gotten wealth. But that did not happen. I feel that many black money hoarders would deposit the money, hoping that "negotiate & settle" the whole thing with the IT department folks (who are generally not known to be a very honest bunch). I would like to eagerly watch on how the government uses its IT department to make this scheme a success.

What surprises me is the eagerness shown by some quarters to paint this entire scheme a big failure even before the Dec deadline. I simply cannot understand the motivation behind that.

Politics is out of scope for this forum. But right from 2014, there has been a very systematic attempt to run down the present government. The media has been the biggest champions for this cause. At times it is that a simple fact that this government won the elections just like its predecessors is ignored.

[Puneet.S]

Originally Posted by V.Narayan

Suggestion - go to the bank at 3PM or so. You will find it empty or almost so. Then deposit your old notes. If you are a privileged customer talk to the relation ship manager he will help you out. During this period I have cheerfully used ATMs at the airports. With some left handed thinking it is easy to solve this problem without breaking the law or jumping the queue. Hope your inconvenience comes down.

Tried this approach today but have to report that it did not work out - reached the bank around 3pm with about 25-30 persons ahead of me in the queue (with no cash being disbursed, all there to deposit). Was 4-5th in line when the clock struck 4:30 and branch closed down, 1.5 hours of waiting in the line went waste - couldn't even enter the bank.

Of course, one can 'pull some strings' and find some work around to this situation (being a part of empowered class) but I deliberately chose not to - this being more of a case study (of sorts) about the hassles a common man is facing in front of banks each and every day since the Nov.08th announcement.