December 1 will be a crucial test for Modi's demonetisation drive
In the event of insufficient currency, the problem is likely to compound.
Twenty-two days have passed since Prime Minister Narendra Modi chose to go down in history by demonetising 1,000 and 500 rupee notes, all of a sudden. Now comes his real test.
Whatever the pitfalls and shortcomings, people have managed to battle out the unprecedented crisis so far; but how things will play out once salaries and wages start getting disbursed is what remains to be seen.
The problem will not be in transferring salaries to accounts of employees. It will be in sectors where wages are, as a rule, paid only in cash, and in attending the routine daily needs of households for which there is no option other than cash.
Among the government's many recent decisions was the one allowing higher withdrawals, up to Rs 24,000 in a week, aimed at easing out the crisis.
But how many bank branches would be equipped with enough cash to meet the demand of customers is a million dollar question.
In the event of insufficient currency, the problem would compound. Payment of wages to domestic helps, dues to the milkman or shelling out cash for routine knick-knacks available at the store next door will pose a serious difficulty for all.
Even as the note-printing presses were working overtime and IAF aircraft and helicopters were pressed into service to ensure delivery of currency to every nook and corner of the country, the question still remains - how far and how much?
According to a top bank official in Lucknow, the supply of currency has improved in major cities but remains extremely poor in smaller towns and villages where the options are, as it is, very limited.
The recent order doing away with the initial practice of allowing withdrawals from any branch of a bank has surely brought some respite to bank employees, who were often overburdened with the pressure of customers from branches other than their own. Yet, the currency remains far short of the actual requirement.
|What has come as a big surprise to nationalised banks is the sudden preferential treatment being given to HDFC Bank, through which RBI is routing the flow of currency. (Photo: India Today)|
What has come as a big surprise to nationalised banks is the sudden preferential treatment being given to HDFC Bank, through which RBI is routing the flow of currency. “Even State Bank of India has, of late, been receiving currency through HDFC Bank,” disclosed a senior SBI official. He said: “RBI’s usual practice was to issue currency directly to us and to other nationalised banks and this is the first time supply is being routed via a private bank.”
The arrival of a new 500-rupee note has failed to bring respite, both on account of its quantity as well as quality. Besides, it is likely to create new problems for the illiterate, who could be duped in many ways.
Even bankers do not deny that innocent people could be taken for a ride. "Now that the same denomination is back as legal tender, it may not be difficult to convince an innocent person to accept a demonetised note as long as it looks new and unused,” observed a bank manager, wondering, “why the RBI could not think of 200 or 300 rupee notes.”
Despite the fact that smaller denomination notes - 100, 50 and 10 – have come back into circulation, their shortage is still being felt at all levels. It has been suspected that smaller denomination notes are being systematically flushed out and surreptitiously replaced by the demonetised 500 and 1,000 notes.
An exchange racket is believed to be going on at petrol pumps as well as electricity bill collection centres, where the government allowed acceptance of demonetised notes. If insiders are to be believed, all the smaller denomination notes received at these centres are instantly exchanged with the demonetised notes - for a price - thereby building a new avenue for generation of black money. The cut could be anything between 10 to 20 per cent.
The brunt of this crisis of legitimate currency has been faced more by the salaried class than by traders or businessmen - who, despite the slump - can still play with the notes in circulation.
Sure enough, the problem is likely to worsen for those who get salaries and wages into their accounts on December 1. The RBI alone can bail out the harried citizens and for that it must rise to the occasion and take up production and supply of currency on a war-footing.