In a step to curb the major issue of black money, Prime Minister Narendra Modi on Tuesday, introduced demonetization of Rs 500 and 1000 currency notes with effect from midnight. Welcoming this step, introduced by the PM, bankers and industry leaders said that it has been “a bold and revolutionary” step, and affirmed their commitment to smoothen the transition.
There has been several statements issued by bankers and industry leaders.
“We will strive to restock ATMs at the earliest and make them operational. The Government has given enough exemptions to ensure urgent needs are met. We will work round the clock to ensure that customers have a smooth experience,” State Bank of India Chairperson Arundhati Bhattacharya said.
ICICI Bank chief Chanda Kochhar said, “It’s perhaps the most significant move ever taken to curtail the parallel economy. It will give a sharp boost to all formal channels of payments which in turn will help the formal economy to grow at a faster clip in the long term.”
“It is a big reform which no one expected and will have a huge impact on people who are hoarding money and not disclosing money for tax purposes,” mortgage major HDFC Chairman Deepak Parekh said.
Mahindra Group Vice-Chairman Anand Mahindra tweeted, “success required an element of surprise and its incredible that this master stroke was kept confidential.” In a lighter vein, he added, “Urgent message to anyone who robbed a bank tonight: You just got robbed…”
Sajjan Jindal of JSW Group termed the move as an “amazing and very brave step to curb black money.”
Nirmal Jain, Chairman of leading NBFC IIFL, said the move “is a very powerful measure to curb black money. The Prime Minister has kept his promise of taking stern measures against black money. It was done some 30 years ago and since then a huge build up of unofficial money had happened. On the larger impact of the move, he said it will have deflationary impact in general and more specifically on real estate prices and make homes affordable. It is also indirectly a boon to honest tax payers.”
Mukesh Butani, Managing Partner, BMR Legal, said, “An unprecedented, bold move leading charge from the front, the PM in the most secretively planned, seamlessly executed a move to root out unaccounted and counterfeit currency. A combination of national security concerns and wider agenda to filter out unaccounted income guided the Government to make this move. Figures of high denomination currency in circulation in past 5 years compared to growth in the economy pointed towards indicators of unaccounted money in circulation. Timing was perfect – a month after closure of the income disclosure week and a week after Diwali such that the impact of short term disruption in festive period is minimised.”
Co-founder and CEO, CoinTribe, Amit Sachdev, said, “PM Modi’s move is a watershed moment in India’s fight against the ubiquitous black money issue executed with the finesse and secrecy this issue deserves. While this will have several significant benefits for the economy in the long term, there is likely to be a negative impact on sectors with high cash economy in the immediate term. Sectors like Real estate, construction material, unorganized trade and services will see significant pain in the near term. With liquidity drying up, both NPA and demand for working capital credit are likely to go up. In view of bank’s ongoing NPA issues, how fast will banks react to this situation will be interesting to watch. With limited tax arbitrage between organized and unorganized segments, India will see much sharper move from unorganized to organized segment.
In the long term, though, this is likely to drive several benefits for the economy. India has made the first move from cash economy to a digital economy. Larger amount of savings and cash will find a way into the mainstream economy and be deployed for physical and financial asset creation. Use of digital currency and payment systems driven by UPI, wallets and cards will create enormous transparency and paves way for faster evolution of Fintech companies in India especially in transactions and Online lending space.
Mr Modi has made the right investment for the next generation. This move should improve India’s position on transparency and corruption in the global league table enabling higher capital flow (FDI/FII) into India. It would be good step for government to think of another VDS scheme with 70-80% penalty rate to bridge fiscal deficits.”
In a statement, Kunal Bahl, Co-founder & CEO Snapdeal said, “We welcome the Government’s bold and courageous move to weed out black money, which will have significant long term benefits for the economy. With this, the quantum of India’s economy moving through the digital pipes will witness massive growth. Both Snapdeal and FreeCharge are committed to supporting all such initiatives.”
Anuj Puri, Chairman & Country Head, JLL India said, “The banning of higher currency notes is a major move which will help curb unaccounted-for cash in the real estate sector. We have just witnessed a tremendous step towards increased transparency in the Indian real estate industry. The effects will be far-reaching and immediate, and shake up the sector in no uncertain way. Stricter measures against black money have for long been required to help bring about greater transparency, give the Indian real estate sector more credibility and make it more attractive for foreign investors. Black money deals are more common on the unorganized market, but this practice has, in fact, been on the decrease with greater awareness on the part of buyers. Before too long, the caricatured version of black money driving Indian real estate is no longer applicable.”