At least 4 months needed to replace demonetised notes, not 50 days: Here’s why

As per data furnished by the Finance Ministry, Rs 17,50,000 crore worth of currency notes were in circulation in October-end, out of which around 84 per cent or Rs 14,50,000 crore is in the now defunct Rs 500 and Rs 1,000 notes.

By: IANS | New Delhi | Published:November 14, 2016 7:07 pm
demonetisation, demonetisation rules, pm modi demonetisation, banks demonetisation, demonetisation cash crisis, rupee ban, notes ban, 500 note banned, 1000 note banned, atm queue, atm line, bank queue, bank line, india news People queue up at out side of banks ATM to get money in New Delhi on Sunday. (Source: PTI)

Fifty days of pain is what Prime Minister Narendra Modi has asked people to endure for his sudden demonetisation move. But going by the rate at which fresh currency is being disbursed, even this time will prove grossly inadequate to set the economy right. As per data furnished by the Finance Ministry, Rs 17,50,000 crore worth of currency notes were in circulation in October-end, out of which around 84 per cent or Rs 14,50,000 crore is in the now defunct Rs 500 and Rs 1,000 notes.

Against this, data furnished late on Sunday by the Finance Ministry said in the first four days — Nov 10 to Nov 13 — Rs 50,000 crore were dispensed to customers — in Rs 100 and Rs 2,000 denominations — either by withdrawal from their accounts or ATMs, or exchanged at bank and post office counters.

This, in 18 crore transactions, which has already made the banking system burst at its seams. In fact, on most days so far, and in most bank branches and ATMs, the money is getting exhausted even before the serpentine queues close in. This does not go well with assurances given by the Reserve Bank of India (RBI) that it has enough currency to replenish banks for their disbursals. This, also after RBI printing presses are said to have started printing the new currencies several days ago, to create a good buffer.

Accordingly, even if we assume that the full amount of Rs 12,500 crore is being disbursed in Rs 2,000 denomination on a daily basis, it will take 116 days to replenish the financial system with what has been declared illegal. This also assumes that the total amount of currency declared illegal would be replaced with new notes.

It is not without reason a strong warning against demonetisation by the direct tax administration just four years ago, on what ill-effects it can bring and how futile the exercise can be — all of which is waiting to play out in full bloom today.

“One common demand from the public is that high denomination currency notes particularly Rs 1,000 and Rs 500 should be demonetised,” said the report authored by the chairman of the Central Board of Direct Taxes in 2012, titled: “Measures to Tackle Black Money in India and Abroad.”

“In this connection, it is observed that demonetisation may not be a solution for tackling black money or economy, which is largely held in the form of benami properties, bullion and jewellery,” said the 109-page report.

Further, it said, such a step will raise costs, as more currency notes will have to be printed, cause an adverse impact on the banking system, mainly on logistics issues, make transportation of cash difficult, inconvenience the public and play havoc with disbursal of wages.

“Demonetisation undertaken twice in the past — 1946 and 1978 — miserably failed, with less than 15 per cent of high currency notes being exchanged, while more than 85 per cent of the currency notes never surfaced, as the owners suspected penal action by government agencies.”

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    Ashutosh
    Nov 14, 2016 at 5:22 pm
    Plain wrong.As Atms start getting recalibrated,this pain will end.next 5 days will see alot of atms dish out 2k notes.
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      Aid
      Nov 14, 2016 at 3:25 pm
      Bulk of earlier printed notes will not come out for lt;br/gt;In one week problem will subside
      Reply
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        Krishna
        Nov 14, 2016 at 8:17 pm
        Exactly what we need to rejuvenate India "less than 15 per cent of high currency notes being exchanged, while more than 85 per cent of the currency notes never surfaced, as the owners suspected penal action by government agencies"
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          Krishna
          Nov 14, 2016 at 8:18 pm
          Time to switch to direct deposit, electronic payments etc to a more paper less society
          Reply
          1. S
            Shailesh
            Nov 14, 2016 at 6:13 pm
            Completely baised article..don't try to fool ppl..we can do basic maths.
            Reply
            1. S
              Stonecold
              Nov 14, 2016 at 1:50 pm
              Ha ha ha . Its getting funnier day by day . Tragic Melodrama is now becoming comedy .
              Reply
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                Abhishek
                Nov 14, 2016 at 2:44 pm
                The umption that all of the money in circulation needs to be exchanged is wrong. Some will only deposit it without withdrawing. The total amount deposited until yesterday was more than 1.5 lakh crores. Going by this rate it should not take more than 50 days exactly. Please dont't misguide people and try to create panic.
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                  abdul
                  Nov 14, 2016 at 9:54 pm
                  banking giants are the real winner. How it will destroy black money is questionable. since the banks are the real instruments of inflation, this exercise may actually increase inflation in the long run.
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                    alam
                    Nov 14, 2016 at 4:36 pm
                    what is black money?lt;br/gt;Is that the 78 % of farmers with 65 % without bank account of our total potion hold the black money.lt;br/gt;lt;br/gt;Farmers deserve their due. Agriculture is important and farmers are one of the pillars of India's standing. The journalistic community has to undergo reformation in the context of truth reporting and unbiased approach to problems being reported. The media should shun from fabricated news and news for payment or to please any lobby either in politics or in society.
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                      Anil
                      Nov 14, 2016 at 3:59 pm
                      Once the calibrated ATMs work from tomorrow and there is another batch of 5 million 500 rupee notes, coming to circulation from wednesday ( as per RBI ) things will start improving.
                      Reply
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                        Avinash
                        Nov 14, 2016 at 8:15 pm
                        If public is demanding to demonitise 500 / 1000, for sure they didn't ask 2000.lt;br/gt;PM is fooling nation.
                        Reply
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                          giri
                          Nov 14, 2016 at 2:49 pm
                          one mistake made in the article is on the umption that ATMs would be running as they are doing now. currently i think most ATMs are able to only support 200 people max as the cash is running out. After calibration they should be able to support more than 2000 ppl at day and there are 2L ATMs. added to that there would be increase in amount being dispensed at Banks from current 4000 after there is enough currency. So with the same number of transactions there would be an increase in cash flow.
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                            jawabali
                            Nov 14, 2016 at 4:23 pm
                            Any money that is not in bank with in 50 days is obsolete. all money that is legal will be in circulation. whats the need for 4 months? imbecile wrote the article?
                            Reply
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                              Burjis Wadia
                              Nov 14, 2016 at 2:44 pm
                              What a moronic article - wonder why IE is reporting this as headline news. I dont even wish to get into specifics to prove how ignorant this report is - some of my friends below have articulated it well.lt;br/gt;lt;br/gt;One MAJOR difference this time demonetisation when compared to 1946 and 1978 is the exhaustive and large use of debit / credit cards.lt;br/gt;lt;br/gt;I guess someone will point out that poor sections of society do not have access to debit / credit cards - but still a large section does use it. So that eases pressure on the system. Also with PM Jan Dhan Yojana bank accounts with zero deposits too were issued debit cards for withdrawal.lt;br/gt;lt;br/gt;I find it indeed strange that IE has reported this. These articles are best suited to left-wing media houses like Times of India, Hindustan Times, The Hindu, etc.lt;br/gt;lt;br/gt;Take it off IE - take this report off; it is misleading to be polite.
                              Reply
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                                Danny Martello
                                Nov 14, 2016 at 6:25 pm
                                Indian Express is absolutely right on this one. lt;br/gt;Most people do not even grasp the magnitude of this operation and how poorly it is thought out and executed. Modi obviously is surrounded by too many sycophants. lt;br/gt;Whether this is going to end well?lt;br/gt;lt;br/gt;I just feel sorry for the people queing who have to endure this madness.
                                Reply
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                                  dd
                                  Nov 14, 2016 at 2:23 pm
                                  These are wrong calculations. Consider 20% no saw.. May be large deposit will start after one month which doesn't require that long like handling 20 customers...
                                  Reply
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                                    dd
                                    Nov 14, 2016 at 1:48 pm
                                    Don't demoralize people...Co operate in a good cause.
                                    Reply
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                                      ASHOK KUMAR
                                      Nov 14, 2016 at 4:21 pm
                                      All MPs are drawing money from Parliament House ATMs taking five minutes and many of them are receiving money sitting in their house, thanks Modi's directions in this regard to serve MPs at their door steps.
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                                        Dinesh
                                        Nov 15, 2016 at 6:16 am
                                        3L cr is already deposited only 10 L cr has to be deposited as out of 14 L cr 2l cr is already in the banking and govt. At least 2l cr will not be deposited. So calculate yourself.
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                                          Praveen Chopra
                                          Nov 14, 2016 at 7:51 pm
                                          Demonitisation is a very welcome move for the common man. Of course it will not rid the country of corruption and black money but it will cause a very big dent in the system let's look at the positive side.
                                          Reply
                                          1. Z
                                            zafar gani
                                            Nov 14, 2016 at 5:56 pm
                                            We must adore Feku for his style of governance over government. There no govt. Time to replace feku with anyone having commonsense,
                                            Reply
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