Sunday, November 13, 2016

Demonetisation hits road blocks in rural areas


Though late, demonetisation has hit as many bottom lines as the media headlines. Life will never be the same for those demanding gratis for nothing. No longer can the Private Medical Colleges sell the management quota for crores of rupees, for few are left with such crores. Even private money lenders would dispense credit at lower rates than before. NBFCs compete with banks getting their vaults overflowing with deposits in a couple of months from now. Institutional credit will be able to fall in line only banks change their mindset to serve the farmers, rural artisans, and MSMEs in a big way. While this is music to the ears, rural areas at the moment are in tears.



Out of 1,50,000 odd commercial bank branches, there are only other 1,30,000 access points with just 22 percent of them in the Post Office fold. Primary Agricultural Credit Cooperatives and District Cooperative Central Banks’ rural branches do not have currency holding capacities. A visit to the neighbouring villages on Thursday in Mahabubnagar and Nalgonda districts revealed the sob stories of the effect of demonetisation.

This being the season of marriages, several of those engaged in wedlock said that they took cash to buy the wedding clothes and decorations and they have to miss the Muhurtham if they were to draw exchange only Rs.4000 per day and that too travelling a distance of at least 20-30km to reach the Bank branch as the post office did not receive cash in lower denominations to substitute the withdrawn currency notes of Rs.500 and Rs.1000. And they have to do it every working day for at least 20 or 25 days if their dreams of marriage were to come true.

A tribal village in Adilabad served only by a Business Correspondent during the last ten months its banking requirements has a different story to tell today. The tribal families that are used to spending in Rs.500 denominations and remitting into the bank have no outlet to convert their Five hundred rupees into lower denominations.

Rural and tribal unbanked areas are not on the antenna of either the Union Ministry of Finance or the RBI when the demonetisation is announced. The FAQs of the RBI did not even make a mention of the Business Correspondents and Business Facilitators on the route map of monetising the demonetised currencies.

RBI should mobilise safe and secure Mobile cash dispensing vans to the rural unbanked areas for pre-specified and notified hours to exchange and remit cash up to the specified limits.

Presently, the BCs have limited holding capacity that is used for putting cash into the savings bank accounts of the villagers. The BCs since the early hours of 9th November stopped receiving the barred currencies. They also are losing their earnings by the day. Even they can exchange cash only to the extent of limits specified for individuals.

Several Indians staying abroad hold up to Rs.25000 per person in these withdrawn currencies. All the foreign banks and exchange kiosks abroad as understood from my daughters staying abroad have closed the counters for exchange of Indian currency. They also said that the currency to the earlier legitimised limit no longer holds valid and they can burn their Indian Rs.500 and Rs.1000. Our embassies and the RBI site does not provide appropriate answers.

Yet, the villagers and tribals are in great rejoice as they get money in smaller denominations hence forward to spend on consumables and liquor. Before it is late, the RBI would do well to immediately address the issue of replenishing the stock of old withdrawn currency wherever it existed with the new and lower denominations and also provide new outlets of exchange on war footing.  

For the first time after independence, the efficiency of Currency Department of the RBI and the Security Transport system are put to test and it is hoped that the central bank would live up to the expectations. Initial baby steps hold many lessons to correction.

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