HDFC Bank managing director Aditya Puri on Wednesday termed the demonetisation as a “necessity” which will benefit the economy in the long run by way of rate cuts, stopping counterfeiting and broadening the tax base. “We, at HDFC Bank, feel this is a laudable objective which will provide benefits to the economy and people in the long run,” he said in a note to bank account holders.
He said the demonetisation exercise announced by Prime Minister Narendra Modi on November 8 is a “necessity” to root out counterfeit notes, which have a direct correlation with terror funding.
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Stating that an effort is being made to ensure that people conduct their business in a fair and transparent manner, the veteran banker said a country cannot progress if less than 10 per cent of the population pays income tax. It will also help root out corruption and bring down the cost of banking services, he said.
As part of the exercise, the government scrapped Rs 500 and Rs 1,000 banknotes from the midnight of November 9, and introduced new series of Rs 2,000 and Rs 500 notes. This has led to confusion and long queues to access own deposits.
With a large amount of the cash stuck in an unproductive manner earlier, Puri said it is “imperative” that the savings are used to boost investments.
“This will give banks the capacity to lend and also to bring interest rates down in order to spur investment and be competitive,” he said.
Citing a MasterCard study, Puri said that cash involves high costs of up to 1.5 per cent of the GDP on printing, transporting, storage and soiled notes, and a move to digital as is being witnessed in the fortnight since the move, will help not just the customers but also the economy.
While doing so, it is necessary to ensure that people in semi-urban and rural India also get the convenience of using the digital services, he said.
Puri also made an appeal for faster adaption of digital channels, saying this will help not just the bank but customers as well.
“It is necessary that we all understand that the country is moving towards reduced usage of cash,” he said, adding digital banking is a joint effort across all stakeholders.