Important: Top 5 Emerging Banking Trends in 2017 You Must Know

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Source: livemint.com

The year 2016 was a turbulent and path-bearer one for the banks, stock markets and NBFCs (Non-Banking Financial Institutions). First the Brexit announcement in the middle of the year and then the dual co-incidence of Donald Trump’s victory followed by Prime Minister Narendra Modi’s demonetization scheme – have affected the banking industry to a certain extent for sure.

In November, once the Demonetisation decision of the old notes of higher denominations of 500 and 1000 INR was announced, people immediately went frenzy. The banks were instantly flooded with the currency notes of 500 and 1000 INR as both currency notes ceased to remain a legal tender anymore.

These two notes constituted around 85% of the nation’s currency in circulation, so after the demonetization decision, a nation-wide cash crunch situation ensued. It was further aggravated due to long queues at banks branches and ATMs followed by the limit on cash withdrawals from bank accounts.

Banks are overburdened with liquid cash now and they have to put them for investment purposes and productive uses. Some major banking trends are ready to take place in the coming days. However, the scene will actually become crystal clear only after the union budget 2017.

Upcoming Banking Trends 2017

  • Entry of Payment Banks: Many new banks are expected to launch in the coming year. Around 10 small finance banks and eight payment banks will be launched very soon in 2017. Airtel Payments bank has already started its operation in Rajasthan, and it will soon begin its nation-wide operation too. Currently, it offers 7.25% interest rate on saving accounts (against normal 4% offered by other banks).
  • More Loans and Advances: With the banks obtaining an enormous pool of surplus money in the form of deposits, there is no doubt that the New Year will see a sharp rise in loans and advances by the private and public sector banks. Though private sector banks are more liberal towards offering loans, but after demonetization, public sector banks will also start giving more loans to customers with fewer paper works, formalities and processing time.
  • Promotion of Electronic wallets: For transaction purposes, people will now get their electronic wallets linked to bank accounts for smoother transactions. Mobile apps and e-wallets like paytm and freecharge will get a massive boost in 2017. People will keep lesser cash in their pockets and may pay more via paytm and other apps.
  • The Merger of SBI and associates: Next year, India’s largest bank – the SBI (State Bank of India) and its five associates might merge for easier banking operation and more flexibility. This will empower the SBI and its associates to take greater risk and offer more loans to customers.
  • Changing Trends in Microfinance Industry: India’s Rs. 60,000 plus microfinance industry will get a complete makeover soon. These micro financial institutions mostly do their transactions on a cash basis but after the Modi’s demonetisaion announcement they will move towards cheque and bank transfer for transaction purposes. Advancement of loans and their repayments are also expected to go paperless. MFIs are shifting towards offering payment via mobile apps and bank transfer. This will keep the customers in the loop and prevent further bad debt and cheating.

Though people are expected to be largely benefitted by such expected banking trends in 2017, but only the time will reveal the actual benefits of these banking trends for customers in reality.

Demonetization in Venezuela Vs India

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The Latin American country, Venezuela, has tried to ape India’s nation-wide note ban decision, but it had backfired badly following which President Nicolas Maduro was forced to postpone the entire decision until January 2 next month. The Venezuelan government took the decision last week on December 12, following which 100-bolivar note was ceased to be a legal tender.

But the sudden decision was bound to have violent repercussion in one of the world’s most violent countries. It led to massive protest across the streets of Caracas and other cities messed up further by violent protests and complete chaos. The decision was abruptly taken leaving the entire nation of around 32-million people in a state of complete shock, anger and despair. However, the government had now postponed the decision as of now to prevent further law and order mess in the country.

The Venezuelan President confirmed that 100-Bolivar bills will remain a legal tender as of now. However, the international borders with neighboring Columbia and Brazil would stay closed to prevent hoarding of Venezuelan cash by black money hoarders.

Maduro further alleged that these mafias are in touch with the US to destabilize the country. Currently, Venezuela has the world’s highest inflation rate of around 475% according to the IMF. The 100-bolivar demonetization was planned to curb the high prevailing level of inflation in the nation.

The people of Venezuela stood in long lines at banks for hours together to meet a Friday deadline to exchange their 100-Bolivar currency notes. Even when the deadline was extended, people still queued up at Banks out of fear psychosis and to get rid away from the demonetized currency at the earliest. According to government estimates, a lot of shops and shopping malls were looted and several people injured in violent clashes after the Venezuelan government’s sudden demonetization move.

Demonetization in India & Venezuela: A Comparison Study

Interestingly, in the context of India, common people stood by the government’s decision and demonstrated overwhelming support for Indian Prime Minister Narendra Modi.

  • In India, 500 & 1000 INR notes constitute around 86% of the currency in circulation, but in Venezuela 100-Bolivar note forms just 48 % of the total currency in circulation.
  • The Indian government gave around 50-day time limit to people to get their 500 & 1000 rupees note exchanged at the banks and post office with the amount of same values at different denominations, but Venezuela gave just 10 days for the people to deposit their demonetized 100-Bolivar notes at Banks. However, the entire decision was postponed later.
  • India demonetized notes of higher denomination of 500 & 1000 INR to tackle the problems of corruption and terror funding in Jammu and Kashmir by Pakistan, but Venezuela took the decision to curb the rising problems of international gangs and drug racketeers who hoard Venezuelan currency notes abroad to sell the same at subsidized rates in Columbia and neighboring areas.
  • The Venezuelan government was forced to postpone the decision since people went on a rampage across streets inciting violence, In India, Modi government didn’t backtrack albeit with considerable inconvenience to people. However, the level of violence in India is far lesser as compared to Venezuela after demonetization move.
  • In India, opposition parties and some of the people termed the move as a good decision coupled with bad execution, but in Venezuela, people are extremely furious with so little deadline given to them to get their demonetized notes exchanged at banks.

Cashless Economy: What about these 600 million people

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600 million Indians don’t have bank accounts in India.

Even before demonetisation, Prime Minister Narendra Modi has laid emphasis on a digital Indian economy. This idea of digital economy has become even more obvious with shifting focus from the problems faced by the poor due to cash crunch to the future that can be through digital economy.

History of cashless economy

The first country to push cashless economy is Denmark along Norway and Sweden. Among others, Australia, UK, South Korea is also pushing for cashless society.

What’s wrong with cashless society?

Today, we live in a world that is highly unequal, especially when it comes to distribution of wealth. A cashless society will further jeopardize this situation for the poor and uneducated who have no access to such knowledge.

In such a scenario, the govt. openly shouting for a cashless society and PM Modi asking party workers to promote this idea seems unrealistic and ill fated when we know that the poor are going to be left behind.

Not only that, BJP has euphemistically ignored the impact of demonetisation on the poor. The deaths that have been caused, the decreasing payment of daily wage labors and loss of livelihoods for many farmers among others has been ignored completely by the ruling political parties.

How can the government that claims to be ‘pro-poor’ talk about a cashless economy when they know that only the literates, affluent and technically learned people will be the true beneficiaries of this idea. While the poor, illiterate, child labours, women labours, daily wage labours and many more will be excluded from its success.

Developed Scandinavian countries, Australia and UK among others can afford such a plan for their small number of population as compare to India and almost 100% literacy. But laying too much emphasis on this plan in India and at the same time failing to educate and improve literacy will definitely push further the increasing gap between the rich and the poor.

Such a plan is not pro poor, but pro rich and middle class, attractive to the bourgeois and mostly effective and feasible in cities. There are only 800 per million card swiping machines in the country. What’s even sadder is the ignorance of media to educate and debate the impact of this intention. The government is hiding behind big bang schemes to hide its malfunctioning and we people are foolishly standing and enjoying as the world changes in front of our eyes and the poor are thrown aside like a garbage bag.

 

Top Rumors on Demonetisation

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Did you know that your 2000 rupee notes were capable of getting charged?

 

Don’t worry if you don’t because the day new 2000 rupee notes came into the market, fake news and rumors have spread like wild-fire. Some said that notes can be charged and some said that they can be tracked meters inside the ground.
Here’s a look at the rumors that shocked many and made many others laugh.
1. The 2000 rupee note has a nano chip
Sweta Singh of Aajtak confirms this news below by describing very nicely how your tacked 2000 rupee notes can be tracked. I wonder if she is foolish to have thought about it or its many of us who believed.
https://www.youtube.com/watch?v=E09Ilc7fHIE
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2. That 2000 rupee notes can store solar energy
This was shown by a person who made a prank video lighting a buld with the help of the 2000 rupee note.
Here’s the video link – https://www.youtube.com/watch?v=hNsxrWEnkmQ
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3. 2000 rupee note that sheds colour is fake
Unfortunately, the fact is just the opposite of this rumor. Real notes shed some colour and the government has accepted the problem.
4. The new notes are waterproof
See for yourself, what happened when this guy experimented with 2000 rupee note in water.
https://www.youtube.com/watch?v=lrhWlZ8OwVU
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5. Mahatma Gandhi no more on the new note
Totally false. People saw the back of the note and thought it’s the front where Gandhi’s picture was absent, but the front is where Gandhi is.

 

6. When withdrawing money from the ATM, people will be marked with indelible ink
The truth is that the indelible ink was for people standing in the bank queues where they kept coming again and again to exchange money. So to solve this problem, indelible ink was to be used.

Indian Express Image
Here is what Twitter has to say on rumors about demonetisation
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It is best to not trust what people in your neighborhood, office and family say about the new notes. You better get the facts checked yourself and not be fooled by fake news.

Here is what Twitter has to say on rumors about demonetisation

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It  is best to not trust what people in your neighborhood, office and family say about the new notes. You better get the facts checked yourself and not be fooled by fake news.

Is 2000 INR New Note Usable in Today’s Crunched Economy

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new-notee

 

Following the Indian government’s bold step to demonetize the old notes of 500 and 1000 INR, it was expected that the government and concerned authority must have some ready solution to tackle the cash chaos. But even after three weeks of the decision, the situation is still problematic as people still stand in queues and thronging from one ATM to another in search of liquid cash.

Some get succeeded to withdraw money from the machine while some don’t. Amidst the prevailing nationwide cash crunch, the RBI has introduced the new purple colored 2000 INR note on November 10 this year. But people find it extremely difficult to use it for transaction purposes.

Honestly speaking, unless the situation comes to normalcy it’s almost impossible to use the new note at one go. Obviously, the way people are running here and there to withdraw smaller denomination notes like the 100s, 50s, 10s from banks, certainly, there is no taker of Rs. 2000 INR notes now. Even if some of the people accept it they do so with a certain degree of restraint and reluctance.

The basic reason why people don’t want to take such notes of the big denomination is the wide gap in the value of notes of 500 and 2000. The common man might feel it is easier to transact four currency notes of new 500 notes than a single 2000 rupee note in the current chaotic economy. It will surely take time when people will start accepting such notes for their day-to-day transactions.

Why People Don’t Accepting the New 2000 INR Notes

  • The current situation doesn’t let a person withdraw more than Rs. 2000/- per day from ATMs per card. They find it more convenient to withdraw money in 100 rupees notes than a single 2000 rupees note.
  • Grocery and vegetable sellers carry their day to day business with very limited cash. It’s definitely impossible to imagine that a vegetable seller will exchange your Rs. 2000 note for a limited purchase worth Rs. 100 or 200.
  • Many people won’t accept the new 2000 note for the single reason that it will be highly difficult for them to get the same exchanged when they need.
  • The current psyche of the people is to hold as much cash as possible in hand. So they won’t take your Rs. 2000 note until the restriction limit on cash withdrawal is revoked.
  • To meet our daily small transactions such as medicine bills, vegetable and fruit expenses and conveyance by way of rikshaw or bus, what we really need are the smaller notes of 100s, 50s and 10s and not the 2000 INR note.
  • If more and more people get enlightened about the new digital payment systems such as e-wallets, paytm, Bank transfer, chque payment and NEFT, then sooner or later the quantum of cash transactions with denominations of 2000 and 500 will reduce to a large extent.

In order to instill faith of the people in transacting with the new 2000 rupees note, there is an urgent need for the government to enhance the supply of paper currency of smaller denominations such 500/100/50. Meanwhile, also people need to give away their habit of cash holding practice in smaller denominations or preference to hold cash for liquidity purposes.

However, people can still use the new 2000 notes where sizable expenditure is required such as the medical charges for surgery or to buy costly house appliances or IT products. Another way to use such notes is when you pay a big sum of money to your landlord as rent.