Demonetization New.pdf

“A STUDY ON IMPACT OF DEMONETIZATION ON BANKING SECTOR IN MUMBAI SUBURBAN”

1. INTRODUCTION What is Demonetization? Demonetization is a generation’s memorable experience and is going to be one of the economic events of our time. Its impact is felt by every Indian citizen. We the undersigned support all efforts to stop corruption, stamp out black money and counterfeit currency, and act against funding that helps creates unrest in the country be it through terrorism or creating divisions and hatred among people. On 8th November 2016 at 8 PM, Prime Minister Shri Narendra Modi announced the devaluation of 500 and 1000 currency notes and introduction of new 500 and 2000 notes. This Process is called as Demonetization. This decision of demonetize Rs.500 and Rs.1000 notes is misconceived and will not address the problem of black money in the entire nation. Demonetization has been effected is leading to a riot like situation in the country. Black money is generated through evasion of taxes on income from lawful activities and money generated from illegal activities. In the absence of steps to curb the generation of black money, demonetization is a futile excise, as it proved to be in 1978. Demonetization as a cleaning exercise may produce several good things in the economy. It creates unavoidable income and welfare losses to the poor sections of the society who gets income based on their daily work and those who doesn’t have the digital transaction culture. Overall economic activities will be damped in the short term. But the unmeasurable benefits of having more transparency and reduced volume of black money activities can be pointed as long term benefits. Demonetization is the withdrawal of a coin, note or precious metal from use as legal tender. It is defined as the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a chance of national currency. The current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins. Sometimes, a country completely replaces the old currency with new currency. The opposite of demonetization is remonetization, in which a form of payment is restored as legal tender. Demonetization, whenever or wherever it is done, brings about an unsettling impact on the daily life a nation. I would like to make a basic difference between withdrawal and demonetization of a currency, though the words may appear to mean similar. Withdrawal of a currency is a regular exercise done by

most central banks gradually over a period of time where the objective is to introduce newer legal tender in place of older ones. In this case it is life and business as usual the paper simply gets changed over a prescribed period of time. In the case of demonetization it has to be an abrupt stopping of currency and re-monetizing with newly issued legal tender. In this exchange process there is an inbuilt accounting. What gets left behind is the black money which will automatically be expunged from circulation. At the stroke of midnight of November 8, 69 years and 85 days after independence, India took its first sure-footed step towards independence from black money. Prime Minister Narendra Modi in his address to the nation announced the withdrawal of 500 and 1,000 as legal tender. All these years, for reasons best known to those at the helm of affairs, we had side-stepped the issue and with each passing year the juggernaut kept growing bigger and bigger. Based on rumours, the Congress-led UPA Government had planned the step but ultimately developed cold feet. This step was not in isolation as it was preceded by many steps such as the Pradhan Mantri Jan Dhan Yojana under which more than 25 crore bank accounts were opened. The foreign black money disclosure by paying 60 per cent tax, agreement with the US Government for sharing banking information to flush out black money overseas, a new law passed in August 2016 to curb benami transactions, and then the Income Disclosure Scheme which ended on September 30, where Indians could disclose their undisclosed income by paying 45 per cent tax. Despite the tax rate being much higher than the prevailing rate the IDS mopped up 67,000 crore of black money yielding a revenue of 30,000 crore. The total of all the above steps taken by the Modi Government in a little over two years, resulted in black money moping up of the tune of 1,25,000 crore. This historic step of demonetization meant that 13,60,000 crore worth of currencies were no longer legal tender and needed to be changed with new currency notes in an orderly and prescribed manner. The hue and cry that followed was not unexpected, when people found that most cash with them cannot be tendered and only exchanged. The exchange would naturally be a time-consuming process and in the first seven days, it met with a lot of criticism. Some of those standing in the long snaking queue expressed their displeasure at the fact they had to queue up but no one spoke against the idea. It is a tribute to the perceptible people who immediately deciphered the good from the bad and stood with the good. On the other hand, many political parties jumped on the bandwagon to oppose the move. Some tried by visiting people standing in queues to provoke them but quickly left when they found the mood in favour of the Modi Government, despite their immediate hardship. In the case of a few, the decibel were so high and shrill which exposed that their reasons for opposition were not above the table.

The task of replacing nearly 2,000 crore currency notes is itself huge task. Since the last date has been set as December 30, the average daily exchange has to be 40 crore notes. This number will get altered depending on the quantum of 100, 500 and 2,000 notes being released and the amount of black money which will ultimately not get changed and expunged from the system. Based on various reports that have been published, it can be safely assumed that the extent of black money or unaccounted money in the 500 and 1,000 denominations is 30 per cent. Hence a staggering amount of Rs.400000 crore will go out of circulation. This will result in surplus financing in the books of the RBI, which would reduce the inflation between one per cent and 1.5 per cent. The consequential impact of this will be drop in lending rates, which will make monthly installment payments much easier for people, reduce project cost resulting in a massive push for Make in India and Start up India programmes. The real estate market will cleanse itself of all the black money and become more affordable, generating a greater demand. The currency in circulation to Gross Domestic Product shows that the Indian currency is at a very high end. In the UK and the US, it is four per cent and eight per cent respectively, whereas, in India it is 12 per cent, which should reduce to nine per cent post this mopping up. The euro in circulation, at 11 per cent, is nearly at levels as India, but this is not really comparable as the euro covers 19 countries, each of which has a different monetary policy. A lot has been said about the implementation of this demonetization followed by monetization exercise, and many prescriptions have been written or discussed around the table. Since the fundamental goal was to target the black money, there was no alternate to the element of surprise. The slightest of hint, in any form, would have resulted in a flight of black money to safe heavens only to reappear once things settled down. What has been baffling is the reaction of some of the political parties, who till November 7, were very vocal about the huge black money in circulation, often asking what the Prime Minister was doing about it. Now they are being heard asking: Why were 13.60 lakh crore worth of currency demonetized when black money was only one lakh crore rupees? They even justify this new-found low figure by quoting various reports. At a recent round table event, the representative of a political party wanted to know from the Government how much black money had been deposited in the 12 days. The simple answer is that the black money will never get deposited and will get out of the system as worthless paper.

In the 12 days from the historic announcement, we have seen many changes in the process of deposit / exchange / withdrawal of currency. One has to admire the very close monitoring of the Union Finance Ministry, which constantly plugged loopholes that the ‘ingenious minds’ would try to exploit and simultaneously took effective steps to reduce the hardship of the people.

History of Demonetization in India It is not the first time in history, that government has taken this kind of step. It has been happen twice in the past. The first currency ban was announced as on 12th January, 1946 (Saturday) by RBI headquarter. At that time currency notes of Rs.1000, Rs.5000 and Rs.10000 were totally removed from economy. Both the notes were re-introduced in year 1954. At that time people had given 10 days of time period to exchange the notes. Further that was extended to 15 days more where by people has to give reasons why they had not exchanged it in previous 10 days. It had not created much effect at that time. By the end of 1947 out of Rs.143.97 crores, notes of only Rs.134.9 crores were exchanged. Thus notes worth Rs.9.07 were perhaps ‘Demonetized’. In the early ‘70s, the Wanchoo Committee, a direct tax inquiry committee set up by the government, suggested demonetization as a measure to unearth and counter the spread of black money. However, the public nature of the recommendation sparked black money hoarders to act fast and rid themselves of high denominations before the government was able to clamp down on them, Mint reported. Then, in 1977, the Janata Party coalition government came into power. A year into the government’s term, party leader Morarji Desai was more bullish about cracking down on counterfeits and black money. The High Denomination Bank Notes (Demonetization) Act, instated by ruling party on January 16, 1978, deemed the Rs.1000, Rs.5000 and Rs.10000 notes illegal for the second time. That time the people had given only 3 days to exchange the notes. This time around 73.1 crore was demonetized. Latest demonetization in India On November 8 evening at 8 PM, Prime Minister Modi, in his televised address to the nation, made Rs.500 & Rs.1000 notes invalid, saying that it was aimed at curbing the ‘disease’ of corruption and black money which have taken deep root. People holding notes of Rs.500 & Rs.1000 can deposit the same in their bank and post office accounts from November 10 till December 30. All notes in lower denomination of Rs.100, Rs.50, Rs.20, Rs.10, Rs.5, Rs.2 and Rs.1 and all coins continued to be valid, and new notes of Rs.2000 and Rs.500 were introduced. There are no change in any other form of currency exchange be it cheque, DD, payment via credit or debit cards etc. The total value of old Rs.500 & Rs.1000 notes in the circulation is to the tune of Rs.14.2 trillion, which is about 85.5% of total value of currency in circulation. This movement rendered everyone surprised as this was momentous decision and unexpected one which was declared without any prior information.

Demonetization Process  Preparation and announcement The plan to demonetize the ₹500 and ₹1000 banknotes was initiated between six and ten months before it was announced, and was kept confidential. In April 2016, a report by State Bank of India analyzed possible strategies and effects demonetization. In May 2016, the Reserve Bank of India had started preparing for new banknotes and confirmed the design of ₹2000 banknotes in August 2016. The printing of new banknotes started in October when the news stories of forthcoming new banknotes appeared in the media. On 27 October 2016, the Hindi daily Dainik Jagran published a report quoting RBI sources speaking of the forthcoming of Rs.2000 banknotes alongside withdrawal of Rs.500 & Rs.1000 banknotes. On 21 October 2016, The Hindu Business Line had also published a report on forthcoming ₹2000 banknote. The Union cabinet was informed about the plan on 8 November 2016 in a meeting in the evening called by the Indian Prime Minister Narendra Modi. Soon after the meeting, Modi announced the demonetization in an unscheduled live national televised address at 20:15 IST. He declared circulation of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series as invalid effective from the midnight of the same day, and announced the issuance of new ₹500 and ₹2,000 banknotes of the Mahatma Gandhi New Series in exchange for the demonetized banknotes.

 Information leaks Prominent businessmen stated after the announcement of demonetization that they had received prior warning of the move, allowing them to convert their money into smaller denominations. A BJP MLA from Rajasthan, Bhawani Singh Rajawat, claimed in a video that wealthy businessmen were informed about the demonetization before it occurred. He later denied the comments.

 Cash exchange and withdrawal People gathered at ATM of Axis Bank on 16 November 2016 in Mehsana, Gujarat to withdraw cash following deposit of demonetized banknotes in bank. The Reserve Bank of India stipulated that the demonetized banknotes could be deposited with banks over a period of fifty days until 30 December 2016. The banknotes could also be exchanged for legal tender over the counter at all banks. The limit for such exchange was ₹4,000 per person from 8 to 13 November, was increased to ₹4,500 from 14 to 17 November, and reduced to ₹2,000 from 18 to 25

November. The exchange of banknotes was stopped completely on 25 November, although the government had previously stated that the volume of exchange would be increased after that date. International airports also facilitated an exchange of banknotes for foreign tourists and out-bound travelers, amounting to a total value of ₹5,000 per person. Fuel pumps, government hospitals, railway and airline booking counters, state-government recognized dairies and ration stores, and crematoriums were allowed to accept the demonetized banknotes until 2 December 2016. Cash withdrawals from bank accounts were restricted to ₹10,000 per day and ₹20,000 per week per account from 10 to 13 November. This limit was increased to ₹24,000 per week from 14 November 2016. Limits on cash withdrawals from Current accounts/ Cash credit accounts/ Overdraft accounts were withdrawn later. RBI increased the withdrawal limit from Savings Bank account to ₹50,000 from the earlier ₹24,000 on 20 February 2017 and then on 13 March 2017, it removed all withdrawal limits from Savings Bank Accounts. A daily limit on withdrawals from ATMs was also imposed varying from ₹2,000 per day until 14 November, and ₹2,500 per day until 31 December. This limit was increased to ₹4,500 per day from 1 January, and again to ₹10,000 from 16 January 2017. From 17 November, families were allowed to withdraw ₹250,000 for wedding expenses. Farmers were permitted to withdraw ₹25,000 per week against crop loan.

 Ordinance and Act The Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 was issued on 28 December 2016, ending the liability of the government for the demonetized banknotes. The ordinance also imposed fines on people found carrying out transactions with them after 8 November 2016, or holding more than ten of them after 30 December 2016. It provided for the exchange of the banknotes after 30 December for people who had been outside India between 9 November and 30 December. The Specified Bank Notes (Cessation of Liabilities) Act, 2017 was notified on 1 March 2017, replacing the ordinance.

Reasons for Demonetization In a single master stroke, the government has attempted to tackle all three malaise’s plaguing the economy, a parallel economy, counterfeit currency and terror financing. The main reasons for demonetization are –

 To tackle black money in the economy.  To lower the cash circulation in the country which” is directly related to corruption in our country.  To eliminate fake currency and dodgy funds which have been used by terror groups to fund terrorism in India  To fight black money, corruption, terrorism and counterfeit currency with one single decision.

What is Banking? Banking can be defined as the business activity of accepting and safeguarding money owned by the individuals and entities, and then lending out this money in order to earn a profit. However, with the passage of time, the activities covered by banking business have widened and now various other services are also offered by banks. The banking services these days include issuance of debit and credit cards, providing safe custody of valuable items, lockers, ATM services and online transfer of funds across the country / world. It is well said that banking plays a silent, yet crucial part in our day-to-day lives. The banks perform financial intermediation by pooling savings and channelizing them into investments through maturity and risk transformations, thereby keeping the economy’s growth engine revving.

Reserve Bank of India The Reserve Bank of India (RBI) is India's central banking institution, which controls the issuance and supply of the Indian rupee. Until the Monetary Policy Committee was established in 2016, it also controlled monetary policy in India. It commenced its operations on 1 April 1935 in accordance with the Reserve Bank of India Act, 1934. The original share capital was divided into shares of 100 each fully paid, which were initially owned entirely by private shareholders. Following India's independence on 15 August 1947, the RBI was nationalized on 1 January 1949. .

The RBI plays an important part in the Development Strategy of the Government of India. It is a

member bank of the Asian Clearing Union. The general superintendence and direction of the RBI is entrusted with the 21-member central board of directors: the governor; four deputy governors; two finance ministry representatives (usually the Economic Affairs Secretary and the Financial Services Secretary); ten government-nominated directors to represent important elements of India's economy; and four directors to represent local boards headquartered at Mumbai, Kolkata, Chennai and the capital New Delhi. Each of these local boards consists of five members who represent regional interests, the interests of co-operative and indigenous banks.

The central bank was an independent apex monetary authority which regulates banks and provides important financial services like storing of foreign exchange reserves, control of inflation, monetary policy report till August 2016. A central bank is known by different names in different countries. The functions of a central bank vary from country to country and are autonomous or quasi-autonomous body and perform or through another agency vital monetary functions in the country. A central bank is a vital financial apex institution of an economy and the key objects of central banks may differ from country to country still they perform activities and functions with the goal of maintaining economic stability and growth of an economy. The bank is also active in promoting financial inclusion policy and is a leading member of the Alliance for Financial Inclusion (AFI). The bank is often referred to by the name Mint Street. RBI is also known as banker's bank. The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is whether Governor sits and where policies are formulated. The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as:"...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage ."The Preamble of the RBI speaks about the basic functions of the bank. It deals with the issuing the bank notes and keeping reserves in order to secure monetary stability in the country. It also aims at operating and boosting up the currency and credit infrastructure of India.

There are two types of bank 1. Public Sector Banks Public sector in the banking industry emerged with the nationalization of Imperial Bank of India (1921) and creating the State Bank of India (1955) as a part of integrated scheme of rural credit proposed by the All India Rural Credit Survey Committee (1951). The Bank is unique in several respects and it enjoys a position of permanence as the agent of RBI wherever RBI has no branches. It is the single largest bank in the country with large international presence, with a network of 48 overseas offices spread over 28 countries covering all the time zones. One of the objectives of establishing the SBI was to provide extensive banking facilities in rural areas by opening as a first step 400 branches within a period of 5 years from July 1, 1955. In 1959, eight banking companies functioning in formerly princely states were acquired by the SBI, which later came to be known as Associate Banks. Later, two of the subsidiary banks', viz., the State Bank of Bikaner and Jaipur were merged to form the State Bank of Bikaner and

Jaipur, thus form eight banks in the SBI group then making banks in the state bank group. The Public sector in the Indian banking got widened with two rounds of nationalization-first in July 1969 of 14 major private sector banks each with deposits of Rs.50 crore or more, and thereafter in April 1980, 6 more banks with deposits of not less than Rs.2 Crore each. It resulted in the creation of public sector banking with a market share of 76.87 per cent in deposits and 72.92 per cent of assets in the banking industry at the end of March 2003. With the merger of 'New Bank of India' with 'Punjab National Bank' in 1993, the number of nationalized banks became 19 and the number of public sector banks 27. The number of branches of public sector banks, which was 6,669 in June 1969, increased to 41874 by Mach 1990 and again to 46,752 by March 30, 2003. The public sector banks thus came to occupy a predominant position in the Indian banking scene. It is however, important to note that there has been a steady decline in the share of PSB's in the total assets of SCB's during the latter - half of 1990s. While their share was 84.5 per cent at the end of March 1996, it declined to 81.7 per cent in 1998 and further to 81 per cent in 1999.

2. Private Sector Banks The private-sector banks in India represent part of the Indian banking sector that is made up of both private and public sector banks. The "private-sector banks" are banks where greater parts of stake or equity are held by the private shareholders and not by government. Banking in India has been dominated by public sector banks since the 1969 when all major banks were nationalized by the Indian government. However since liberalization in government banking policy in 1990s, old and new private sector banks have re-emerged. They have grown faster and bigger over the two decades since liberalization using the latest technology, providing contemporary innovations and monetary tools and techniques. The private sector banks are split into two groups by financial regulators in India, old and new. The old private sector banks existed prior to the nationalisation in 1969 and kept their independence because they were either too small or specialist to be included in nationalisation. The new private sector banks are those that have gained their banking license since the liberalization in the 1990s. Private Sector Banks also refer to those banks where most of the capital is in private hands. In India, there are two types of private sector banks viz. Old Private sector Banks and New Private Sector Banks. Old Private Sector Banks are those which existed in India at the time of nationalization of major banks but were not nationalized due to their small size or some other reason. After the banking reforms, these banks got license to continue ad have existed in India along with new private banks and government banks.

2. REVIEW OF LITERATURE Abhani Dhara K in International Journal of Marketing & Financial Management (Vol. 5, Issue 3 March, 2017) on ‘A study on Impact of Demonetization over Banking sector with reference to Veraval city’ : Thus it is clear from the research that due to demonetization all types of banks have faced many difficulties while dealing with common peoples. By using the primary data method, a researcher had conducted their research about demonetization. In the research paper, he had tried to explain the concept of demonetization. Demonetization though it has created some positive and some negative impact on banks in Veraval city. A researcher had completed his study with the help of questionnaire & diagrams with the interpretation. The questionnaire has covered following types of questions i.e. Is demonetization having a positive impact over banking sector, Is there an impact on online banking due to demonetization, Is government has not prepared enough for the post demonetization situation, etc. A researcher had made some more questions for bank employees to study about demonetization. As a result, he got great response by employees. A researcher had not covers all the banks in the veraval city for study, which may not provide complete picture of the effect of demonetization over banking sector. A researcher finally concluded that it was compulsory for the government to take some steps like demonetization to decrease corruption, terrorism, black money, etc. Ms. Sapana Kumari & Ms. Nida Zaidi (April 2017) in their research paper studied impact of demonetization on the banking sector. A researcher had done their research study by taking the primary data as well as secondary data. For the study of impact of demonetization, they take only one city i.e. Meerut. By using the primary data method, they had studied the positive and negative impact of demonetization on banking sector with the help of questionnaire which is made by them. Through this study they got an idea about the views of bank employees towards demonetization. As per their study, the researchers said that Demonetization does have an impact on the banking sector. At the end of the researcher they had concluded that demonetization has helped reduce black money, bribery and terrorism in India. People had faced inconvenience because of demonetization and they are not happy with it. Demonetization has led to the increase in the use of plastic cards, online banking, opening of new accounts, number of customers in the branches and the use of ATM. Dr. G Uppili Srinivasan, Anandhi Eakamaram & Vincilin Nesamani in International Journal of Trend in Research & Development (IJTRD) carried out research on “Demonetization : Impact on Banking sector”. From a market perspective, a researcher thought this is very welcome move by the

government & which has taken the black money hoarders with surprise. The researchers stated that demonetization is one of the major steps in fighting against corruption, black money & terror finding. They studied that as per RBI press conference, there are 16.5 billion of ‘500 rupees’ notes and 6.7 billion of ‘1000 rupees’ notes were circulated. Demonetization leads to cash shortage in the country which proves detrimental to a number of small business, agricultural & transportation. The shortage of cash led to chaos and most people faced problems to exchange their banknotes due to long queues outside banks & ATM across the country. As per the objective of study, the researchers studied about advantages and disadvantages of the demonetization on banking sector. They also focused on various terms which directly related to banking sector with respect to demonetization. The researchers had compared technology usage as based on current use and use in next 3 years with respect of following terms i.e. PC networks, sales tracking software, Rational data base, Automate credit scoring, E-mail, Imaging checks statements, etc. They finally concluded that banks must create performance measurement systems to assure the mix products and services they offer are beneficial to the both customer and the bank. It also needs to support a clearly defined and well communicated business strategy. Padmavati Agarwal & B Bhagavan Reddy (published on 26th Feb. 2018) in International Journal of Research in Humanities, Arts & Literature studied on “Demonetization and Its effect on banking sector”. Demonetization is tool to battle inflation, black money, corruption and crime, discourage cash transactions and help trade. Its effect on banking sector is significant as the bank is a center to channelize the legal tender money to the needs of the society. This study is made to figure out the influence of demonetization on banking sector. The researchers had done their study by using secondary data method. This secondary data involves published literatures such as books, journals, newspapers and relevant government websites. The researchers had studied about the term demonetization. They also studied about demonetization with respect to banking operations. The researchers had explained in their study, there has a positive and negative impact of demonetization on banking sector. Finally the researchers concluded demonetization has badly affected the banks. Banned demonetization were ploughed back & allowed the citizens to exchange with the banks. Though it affected to a greater extent it has paved the economy to grow in the years to come. Shah, Ayash Yousuf (2017) stated that Demonetization is one of the major steps in fighting against corruption, black money, and terror funding. However, the decision was taken without proper preparation and it adversely impacted the public. Without printing enough new currency notes 86% of the currency notes were withdrawn thrashing all market transactions. Only common people had to face problems

exchanging their notes, not the people who were targeted. With an intention to rid the country of black money and dig out tax defaulters and black money holders, the government has taken the step to demonetized Rs.500 and Rs.1000 notes. The sudden announcement of demonetization and failing to plan properly has created chaos among the general public. Common people are facing problems buying with no money in their hands, wasting their time standing in endless queues could have avoided with advance planning. M. Angel Jasmine Shirley (February, 2017) has studied about the “Impact of Demonetization in India” in her research paper. In the first part of the paper, the impact over Indian economy had been explained. As per the research, the BSE SENSEX and NIFTY 50 stock had been fall near about 6% on the very next day. Moreover on the later on days, the country felt severe shortage of the cash. Moreover due to lack of cash overall production had decreased. Banks had not enough new currency for the exchange of the old notes, which breakdown the overall economic system. Moreover in the paper impact of the demonetization over world economy also shown. The first thing that happened after demonetization was decrement in to overall consumption of commodities which results in to decrease in the exportimport. Moreover there was a major impact over the domestic sectors, reduction in the Government liability, farming and fishing industry, business, drop in industrial output, black money, impact over counterfeit currency, bank deposits, jewellery and real estate, IT sector etc. Findings in this sectors says that, though demonetization is a good concept to grab the black money holders, most of black money is kept in form of land, gold, real estate etc. “Not all black money is in cash, not all cash is black money”. People face too much inconveniency due to improper planning about post demonetization. Moreover for number of days they had spent their time by standing in queues. To decline over all negative impact of it, ways are to focusing over tax aspect, cash availability, and elimination of loopholes. Vedashree Mali in International Journal of Commerce and Management Research (Volume 2; Issue 12; December 2016; Page No. 35-36) on Demonetization: A step towards modified India: Demonetization though it has created some positive and some negative impacts on different sectors but in long run it definitely will have positive impact in controlling black money and fake money. The benefits are much dominating and it will be in the long term interest of our country. Government need to take all the necessary steps so s to ensure that there will be a turn into chaos if government takes no necessary steps to circulate in our economy. We congratulate the entire government and those hidden brains of our democracy that brought this decision. The economy is expected to recover soon after the circulation of new currency notes.

V. Gupta (2016), he points out that the main objective of this move was to curb the black money, corruption and fake money menace. All the people but those who were indulged in malpractices welcomed the move. The new currency which replaced the old one is of denomination of 500 and 2000 notes. Though the people faced a lot of inconvenience owing to shortage of funds they did not criticize the government for the move. Even they lauded the currently (2016) Prime Minister of India for this big move. Prime Minister also addressed the people many times telling the people that it was a mahayajna and they must offer their own ahuti in it. Moreover, further said Modi was aware the hardships, people would suffer from but he sought only 50 days for setting the things right. He jibed at the chief political leaders who have stashed big amount of money and now joined hand to force government to take the decision back. The most interesting thing regarding the demonetization is that people are devising various unique methods for transforming their black money into white one. Some of these methods are as follows:

Depositing money in the accounts of their poor relatives and friends.

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Enticing the people with some percentage of money for exchange.

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Asking their employees to stand in the long queues in front of Banks and ATMs for getting money exchanged.

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Hiring labors for some Rupees ranging from Rs.500/to 700/for becoming the part of long queues in front of banks/ ATMs.

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Converting black money in to gold.

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Paying a few months salaries in advance.

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Paying back loans forcibly.

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Using their influence / links with bank employees and so on.

CARE Ratings17 had estimated that demon would have adverse impact on growth due to deferred manufacturing demand and irrevocable service sector. Few economists18 mentioned that demonetization will lead to a significant reduction in the growth rate of GDP.19 IMF had also lowered the growth projection of India by 0.6 percentage points for 2016-17. Scholars have also argued that a larger chunk of Indian economy is contributed by informal sector and as the sector has experienced ground level difficulties20 in settlement of transaction with shortage of cash. This could have perhaps led to the possibilities of recessionary impact of demonetization with economic growth coming to below 5 percent for the FY 2016-17 in the third quarter. Few case studies like Jean Drèze (Delhi School of Economics) reports a 45% decline in earnings of small shopkeepers/businesses in Ranchi; Prateek Sibal (Paris Institute of Political Studies) reports a similar figure of 46% in Amritsar; Vyom Anil (Jawaharlal Nehru

University) finds a much larger drop in average income about 60% of small shopkeepers and casual labourer in Delhi; among others. The employment scenario mainly contributed by informal sector has noticed a sharp fall. As per the report of Ministry of Rural Development, the demand for MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) work increased by 60 percent in December 2016 confirming the jobless environment.21 Most of the studies have captured the time period of the study for November 2016 onwards to latest March 2017. However in the present study the previous two years (2014, 2015) and most recent time period till June is covered to draw a fruitful impact assessment of demonetization move in India. The rest of the paper is organised as follows. Section 3 details the demonetization history in India, outlining international experience. Section 4 presents the rationale for the recent demonetization in India and the procedures followed for demonetization are detailed in section 5. The impact of demonetization on various sectors of the Indian economy including impact on the financial sector, rural economy, digital economy, etc. are analyzed in sections 6. Section 7 presents the conclusion.

3. RESEARCH METHODOLOGY

Objectives of the Study The key role of the researcher is to set the clear, unambiguous objectives of the study which may prove helpful for the understanding the study. By keeping in mind this fact I had set the following goals –  To study the positive impact of demonetization on banking sector  To study the negative impact of demonetization on banking sector  To study the impact of demonetization on bank employees  To study the challenges faced by the bank employees

Scope of the Study This study is useful for determining the impact of demonetization on banking sector & also impact of demonetization on bank employees in Mumbai Suburban. It can help the government to know about what bank employees feel about the demonetization, what types of problems faced by the bank employees during demonetization & what steps can the government take to improve the situation. Demonetization calls for a cashless, digitized India. The government asked the people to go cashless by adopting and adapting to the digital mode of financial transactions. This study focuses on understanding the opinion of bank employees towards digitized transactions.

Method of Data Collection This study is of descriptive nature and tells about the positive & negative impact of demonetization on banking sector. Hence makes use of primary data & secondary data. The entire study is based only on observation and documentation analysis. Primary data is the original data collected by the researcher himself for the purpose of study. A primary data analysis was carried out through structured questionnaire. Secondary data is not original data. This data is collected from various Research papers, Journals, Websites and many others. The questionnaire includes following questions : 1. Do you think, demonetization is having an impact over banking sector ?

2. Do you think that demonetization helped reduce black money & corruption in India ? 3. Do you think there was an impact of demonetization on your workload ? 4. What is the impact of demonetization on cash flow in bank ? 5. What is the impact of demonetization on interest rate of your bank ? 6. What is the impact on money lending ? 7. What is the impact on opening of new accounts ? 8. Did you mind the inconvenience faced through demonetization ? 9. What is the impact of demonetization on the use of online banking ? 10. What is the impact of demonetization on the use of plastic cards ? 11. How many times faced the problems of shortage of cash during demonetization period in your branch ? 12. What do you think that would increase in deposits at the time of demonetization ? 13. What rating would you give to demonetization decision ? 14. Do you think, demonetization had successful ? 15. Do you think that demonetization had impact on Indian economy ? 16. How long would demonetization take for everything to return to normal ?

Sample Size If researcher is going through the total population for the study then it may take the huge amount of time. So it is convenient to take the sample from the population. Sampling is a tool of selecting the sample from population. This study done over here is by using the convenient sampling method. For the study purpose I had focused over Mumbai suburban city as the sample size. The sample being the employers of selected banks, the sample size is chosen to be 10 banks. Sampling would be categorized convenient sampling. The study is based on the data collected from the Bank Officer of selected banks. The banks have been selected on the basis of selected area i.e. Mumbai Suburban. The selected banks are as bellow :

 Standard Chartered Bank – Borivali West  Bandhan Bank – Borivali West  ICICI Bank Ltd – Kandivali West  Corporation Bank – Kandivali West  Axis Bank Ltd – Kandivali West  Vijaya Bank – Goregaon West  Panjab National Bank – Kandivali West  Dena Bank – Jogeshwari West  Saraswat Co-Operative Bank – Kandivali West  State Bank of India – Borivali West

4. DATA ANAYSIS, INTERPRETATION AND PRESENTATION

Q. 1

Do you think demonetization is having an impact over banking sector?

OPTIONS

RESPONSES

%

Not at all

0

0

Somewhat

2

20

Yes

8

80

Not at all Somewhat Yes

Interpretation : The responses from this question tell us the most of the bank officers are believe on there has an impact on banking sector. This move has not been more helpful because the black money holders, tax evaders and corrupt officials may not necessarily keep their money in bags at home as it was the old concept now they invest this money in the market. Hence it can be said that this move by the government has not produced desired results and has cause inconvenience to common man.

Q. 2

Do you think that demonetization helped reduce black money & corruption in India ? OPTIONS

RESPONSES

%

Not at all

2

20

Somewhat Yes

5 3

50 30

Not at all Somewhat Yes

Interpretation : Through the responses from this question we can interpret that the response for option ‘somewhat’ have more percentage as compared to other options i.e. ‘Not at all’ & ‘Yes’ which mean that bank can’t tell surely that Demonetization has helped reduce black money, corruption and terrorism to same extent.

Q. 3 Do you think there was an impact of demonetization on your workload?

OPTIONS

RESPONSES

%

Not at all

0

0

Somewhat Yes

2 8

20 80

Not at all somewhat Yes

Interpretation : Most of the bank officer responded ‘Yes’ in this case as they believe that Demonetization has an impact on their workload. Out of all the banks affected through demonetization bank employees are the most stressed due to increase in their workload.

Q. 4 What is the impact of demonetization on cash flow in banks?

OPTIONS

RESPONSES

%

Increased

7

70

Decreased

2

20

Not impact

1

10

Increased Decreased Not impact

Interpretation : Through the responses of this question we can see that the cash flow in banks has increased during Demonetization.

Q. 5

What is the impact of demonetization on interest rate of your bank ?

OPTIONS

RESPONSES

%

Increased

4

40

Decreased

3

30

Not impact

3

30

Increased Decreased No impact

Interpretation : Through the response of this question we can say that the interest rate has increased but the other two options i.e. ‘Decreased’ & ‘Not impact’ have equal percentage of responses which means that we believe that somewhere interest rate has decreases and somewhere there has no impact on interest rate through demonetization.

Q. 6

What is the impact on money lending ?

OPTIONS

RESPONSES

%

Increased

6

60

Decreased

2

20

Not impact

2

20

Increased Decreased

Not impact

Interpretation : By analyzing the responses of this question we have noticed that money lending ha increased during the period of demonetization as compared to other two options.

Q. 7 What is the impact on opening of new accounts ?

OPTIONS

RESPONSES

%

Increased

8

80

Decreased

1

10

Not impact

1

10

Increased Decreased Not impact

Interpretation : Through the response of this question we can see that people believe that new accounts are opening during demonetization. For depositing money in the banks account after demonetization new accounts are opened.

Q. 8

Did you mind the inconvenience faced through demonetization?

OPTIONS

RESPONSES

%

Not at all

1

10

Somewhat

1

10

Yes

8

80

Not at all Somewhat Yes

Interpretation : Through the responses from this question we can interpret that the people believe that demonetization has caused inconvenience to them. This move by the government has caused major inconvenience to the daily wage earners are they have to leave their jobs just to stand in these long queues to access their own money.

Q. 9

What is the impact of demonetization on the use of online banking ?

OPTIONS

RESPONSES

%

Increased

7

70

Decreased

0

0

Not impact

3

30

Increased Decreased Not impact

Interpretation : Through this question we can understand that the use of online banking has increased after demonetization. In India people were mostly dependent on cash transactions but after demonetization when the supply of money was less people are resorting to the use of online banking and online payments to meet their daily expenses. Thus we can say that the use of online banking has increased after demonetization.

Q. 10 What is the impact of demonetization on the use of plastic cards?

OPTIONS

RESPONSES

%

Increased

8

80

Decreased

0

0

Not impact

2

20

Increased Decreased Not impact

Interpretation : Through the response of this question we can interpret that all of the people believe that demonetization has increased the use of plastic cards. Due to the decrease in the supply of cash because of demonetization most of the people have resorted to the use of mobile banking, plastic cards, online banking, etc.

Q. 11 How many times faced the problems of shortage of cash during demonetization period in your branch?

OPTIONS

RESPONSES

%

More

6

60

Less

2

20

Nothing

2

20

More Less Nothing

Interpretation : The responses of this question tell us that there has a more time faced the problems of cash during demonetization period in banks. Some banks has no problem of shortage of cash & some banks has a less time faced the problems of shortage of cash during demonetization.

Q. 12 What do you think that would increase in deposits at the time of demonetization?

OPTIONS

RESPONSES

%

More

7

70

Less

0

0

Average

3

30

More Less Average

Interpretation : Through the responses from this question we can see that the response for option ‘More’ have high percentage of answers as compared to the other two options which means the bank officer believe that there has an increase in deposits at high level at the time of demonetization.

Q. 13 What rating would you give to demonetization decision?

OPTIONS

RESPONSES

%

Excellent

3

30

Good

4

40

Fair

3

30

Excellent Good Fair

Interpretation : Most of the Bank officer responded ‘Good’ in this case as they believe that Demonetization is a good decision. But the response for other two options i.e. ‘Excellent’ & ‘Fair’ have equal percentage of the answers. Some of the bank officers believe that Demonetization has an excellent decision and some of the bank officer believe that it has a fair decision.

Q. 14 Do you think, demonetization had successful?

OPTIONS

RESPONSES

%

Agree

6

60

Disagree

2

20

Indifferent

2

20

Agree Disagree Indifferent

Interpretation : By analyzing the responses of this questions we can noticed that the bank officer believe that Demonetization had successful to complete the objectives. As per the responses, some bank officer have not agree on the statement of Demonetization had successful.

Q. 15 Do you think that demonetization had impact on Indian Economy?

OPTIONS

RESPONSES

%

Not at all

0

0

Somewhat

5

50

Yes

5

50

Not at all Somewhat Yes

Interpretation : Through the response of this question we can interpret that the responses for two options i.e. ‘Somewhat’ & ‘Yes’ have equal percentage of answers which means that Bank officer admit that demonetization has an impact on Indian economy. This move is helpful because it has helped reduce black money, corruption and terror funding in India to some extent.

Q. 16 How long would demonetization take for everything to return to normal?

OPTIONS

RESPONSES

%

Less than 3 months

0

0

3 months

4

40

More than 3 months

6

60

Less than 3 months 3 months

More than 3 months

Interpretation : According to responses of bank officers, Demonetization had take more than 3 months for everything to return to normal. Then, some of the bank officer said that Demonetization took only 3 months for everything to return to normal.

Findings : This study was conducted to find the “IMPACT OF DEMONETIZATION ON THE BANKING SECTOR”, at the end of this research we can say that Demonetization does have an impact on the banking sector. Through this study we got an Idea about the views of bank employees towards Demonetization. After completing this study we can say that:  70% of the people believe that there was an impact of demonetization on the banking sector.  Demonetization helped reduce black money, corruption and terrorism in India because there are equal responses for the two options i.e. somewhat and yes.  We all know that the workload of the bank employees increased a lot. They had to work overtime. Demonetization has not at all helped the bank employees. There was an impact of demonetization on the workload of Bank Employees.

 The cash flow in banks decreased after demonetization. There was not much currency in circulation after demonetization thus the government had restricted the withdrawal amount.  Interest rates decreased after demonetization. The interest rates were decreased to increase lending of money.  Money lending decreased after demonetization thus the interest rates were decreased to increase the money lending.  The impact on opening of new accounts is increased at the time of demonetization. The numbers of customers in the branches have also increased. We have seen long queues of people outside bank branches and ATM after this announcement.  People mind the inconvenience faced through demonetization as maximum number of people have opted for the option yes.  The use of online banking increased after demonetization due to decrease in the circulation of currency and long queues outside ATM and bank branches people started using online banking.  The use of Plastic cards has increased due to less circulation of money in market. The number of new accounts has increased because people have to deposit their money in the bank account to have new currency.  At the time of Demonetization, the problems of shortage of cash has to average or more in banks for exchange the old notes.  Banks has  A decision of demonetization has to take by the government is good as the per the bank officer. Many banks have agreed that it is excellent decision but with some planning in advance, may resulted better.  According to banks point of you, Demonetization had successful to reduced black money, corruption and terrorism in India. But not to the expected / desired level.  There has an impact of demonetization on Indian economy because of many things was change after the demonetization.  Demonetization has to take 3 months and more than 3 months for everything to return to normal in banking sector.  The functioning of ATM has increased because more and more people are using the ATM to withdraw their cash and they are using it n number of times to fulfil their cash requirement because of the withdrawal limit.

Suggestions :  The new 500 and 2000 banknotes should have been printed and kept ready for distribution. Rs 100 banknotes should have been increased in circulation.



The new notes should have been of the same weight, thickness and size as the old ones.

 Permission should have been granted to cooperative banks to except deposits and to exchange notes.

 To solve the problem of black money strong administrative and tax reforms should have been implemented.

 For eliminating fake currency the government should have announced a time period to exchange the currency (say 3 months).



Promote the use of cashless transactions.

Impact of Demonetization on Reserve Bank of India: On 8 November 2016, the Government of India announced the demonetization of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series on the recommendation of the Reserve Bank of India (RBI). The government claimed that the action would curtail the shadow economy and crack down on the use of illicit and counterfeit cash to fund illegal activity and terrorism. Overnight, Rs.15.44 lakh crore or 86 per cent of the currency in circulation was declared illegal. Norms were announced by the Prime Minister on how people could deal with such currency in their possession which was subsequently changed on an almost daily basis. The government advised RBI to take the call on demonetization and the RBI board obliged the government without losing time. Is this something unprecedented? Does this violate the norms laid down by the RBI Act? Two sections of the RBI Act deal with this – 

Section 26(2) of the Reserve Bank of India Act, 1934 says that on recommendation of the RBI’s central board, the government may, by notification in the Gazette of India, declare that with effect from a date specified in the notification, any series of bank notes of any denomination shall cease to be legal tender. So, there is nothing illegal about the RBI board recommending withdrawal of Rs1000 and Rs500 notes from the system.



And, Section 7 of the Act says “the central government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest”. So, the government’s advice to the RBI on demonetization is in sync with the Act

Had RBI not been convinced about the efficacy of the move, could it have stopped it? Probably not, as under Section 7 of the Act, the government can “direct” the central bank. However, it could have fought against it in private as well as in public as the appearance of autonomy is as important as actual autonomy itself. This has happened in the past, the former governor Y.V. Reddy fought hard against the government’s plan to create sovereign wealth funds and use of foreign exchange reserves for infrastructure development. The finance ministry went to the extent of reaching out to the board of the central bank, seeking help to convince Reddy but he did not budge an inch from his stance. In the end the governor made the finance ministry accept that RBI should have the last word on foreign investment in a holding company of a large private bank.

CLAIMS OF THREAT TO RBI AUTONOMY  It is well known that the government always put pressure on the RBI to push interest rates down to support growth, leading to open conflicts.  The manner in which the former RBI governor Raghuram Rajan took exit and Urjit Patel took ascension to/from the post of RBI governor in September and the subsequent demonetization announcement by Prime Minister Narendra Modi in November, gives clue of rapid deterioration in the central bank’s independence in discharging its functions and government interferences.  The process of cutting the RBI’s wings began way back during the UPA days, when the Financial Sector Legislative Reforms Committee (FSLRC) had recommended taking away the debt management from the central bank to a separate entity, public debt management agency (PDMA) and creating a super regulator and shifting the power to set interest rates from the governor to a monetary policy committee (MPC). While both the proposals — creation of PDMA and MPC — have been welcomed largely to improve the existing framework and avoid conflict of interest, the plan to create a super regulator has been discarded outright.  The process of further weakening the central bank continued during the NDA regime, when the government failed to fill the posts of a number of non-official directors on the board of the RBI (read here) at a time when the central bank was engaged in a credibility fight struggling to manage the massive demonetization exercise in Asia’s third largest economy.  Former RBI deputy governor, K C Chakrabarty, said that the central bank, in the past, was not keen for demonetization. “In the past, RBI has been uncomfortable with it, as rough estimates suggest only 6 percent to 8 percent of black money is in cash. And it does not make sense to hurt 90 percent people, especially the poor and underprivileged, for such a small percentage of black money,”  In a Report Mint stated that ‘RBI has been one of the least independent central banks in the world.’  Former FM P Chidambaram said that ‘‘the power offered by Section 7 has never been exercised in the 83 years of the RBI Act and a weakened central bank wouldn’t do any good for any aspiring economy like India, which is somewhat the situation at this stage’’.  While the RBI has not made public the deliberations of the November 8 board meeting, former Finance P. Chidambaram had questioned the sequence of events, suggesting that the short time intervals between the RBI board decision, the Union Cabinet’s meeting and the Prime Minister’s announcement seemed to indicate that the move was well orchestrated. Mr. Chidambaram is reported to have demanded

that the central bank ought to share the minutes of the board meeting and let the public know that who were the directors ? And who attended it?  Rating agencies like Standard & Poor's have issued caution on a growing trust deficit in India when RBI’s autonomy is curbed and the global investors and economy watchers are looking at the country with an element of scepticism.  Deputy Governor K.C. Chakrabarty says ‘‘it is unclear in this whole exercise is how much say the country's central bank had in the policy decision. RBI's position has always been against demonetization. That was the consistent view of the Reserve Bank in the past.’’  The RBI should have advised the government on the ground reality about withdrawing 86 per cent of the currency notes in circulation and the logistical issues. Note ban has hurt confidence in the central bank.  RBI insiders and some central bank watchers believe that RBI’s autonomy and its authority are indeed under siege, and that this dilution of powers preceded demonetization. The authority was being challenged due to attempts to create a separate debt management agency and an independent payments regulator. The autonomy is being challenged by the inflation targeting framework.  RBI governor Urjit Patel has been under the scanner as speculations are rife that he is just following orders and have no stand on his own. Former Governors like Dr. Manmohan Singh and Raghuram Rajan, were known to take their stand on which policies they believed in and took their own decisions.  Interestingly, the world order is no different. In many countries all over the world, one can witness a trend, in which there is a tussle between the government and central bank, and where the latter is becoming weaker by the day. After the 2008 economic recession, there has been an increasing trend in bad blood between governments and central banks.

ARGUMENTS AGAINST THE CLAIM  Ajay Shah, a professor at the National Institute of Public Finance and Policy, pointed out that Section 7 of the RBI Act empowers the government to give directions to the central bank governor in matters of public interest. According to Shah, the only areas where there is a need to keep the government out are when the regulator is issuing a licence, investigating someone or setting policy rates.

 In a reply to Bloomberg, on a right-to-information query, the apex bank said that the decision to withdraw the legal tender character of the Rs.1000 and Rs.500 notes was taken by the RBI board at 5.30 p.m. on November 8 less than three hours before Modi announced it to the country.  It is illogical to think that an institution like RBI, whose head is appointed by the elected government, not Parliament or by the people, can act completely independent of the ruling political dispensation.  Following the Centre’s decision to implement the recommendations of the committee headed by Dr. Patel, the RBI for the first time in its history, switched to a rule-based approach to monetary policy formulation with an explicit target set for inflation. A Monetary Policy Committee (MPC) has been setup and has started functioning with three representatives each from the government and the RBI, and the veto power with the Governor. “Introduction of inflation targeting framework and a MPC-based approach, have increased the accountability and transparency of monetary policy making,” said Rupa Rege Nitsure, group chief economist, L&T Finance Holdings, who was a member of the Patel committee. ‘‘It ensures balanced representation of various sections of society and is hence more democratic in essence. The publication of the minutes informs general public about the actual thought processes supporting the decision. This helps create a good feedback mechanism.”  Finance Ministry said in a statement said that “The Government fully respects the independence and autonomy of the Reserve Bank of India.” And that “Consultations mandated by law or as evolved by practice should not be taken as infringement of autonomy of RBI.”  The government's demonetization move has led to widespread adoption of online payment and is expected to have a positive long term impact on the economy, the report titled 'India: Transforming through radical reforms' by Assocham and EY observed that improved governance, favourable conditions to conduct business, transparency in government procedures and responsive policy making with an immediate focus on effective implementation of reforms will continue to evolve India into a preferred destination for foreign investment.

Five things to note in RBI’s report on impact of demonetization The Indian Prime Minister Narendra Modi announced demonetization of 86% of the currency in circulation on November 8, 2016. The action was taken to hit at corruption, black money, counterfeiting and terror financing. The actual impact of the move has been much discussed and analyzed. Information,

however, was sparse. Even the Reserve Bank of India couldn’t quantify the impact in time for their monetary policy review. Until recently, that is. A few days back, the RBI published a preliminary report on the macroeconomic impact of demonetization. Here are 5 points to note: 

Transient impact

The Indian economy has been adversely affected by the demonetization drive, the RBI report said. However, this impact was short-lived in most sectors of the economy. The months of November and December 2016 witnessed the greatest challenges. But the impact moderated significantly around the year-end. By mid-February, the impact dissipated by a large extent, the RBI report said. 

Impact on productivity

One of the lead indicators of economic activity and growth in the country is Purchasing Managers’ Index (PMI). It measures the increase or decrease in orders, inventories, employment and production for manufacturing and service companies. It thus indicates the economic health of the manufacturing and service sectors. Demonetization affected company productivity, the RBI said. This can be seen in the decline in manufacturing PMI to 49.6 in December from 54.5 in October. A PMI reading under 50 indicates negative growth, while a reading over 50 indicates expansion. However, the PMI data crossed the 50 again in January. This indicates the reduction of impact in the new year. The PMI in services sector followed a similar trend. 

Sectors affected

The impact of demonetization was visible mostly in the construction and real estate sector, the RBI report said. Labour-intensive areas such as textiles, gems, jewellery have also been affected. This was primarily due to the shortage of cash in circulation. However, the strong growth in sectors such as manufacturing, agriculture, electricity, and mining ensured that the overall impact on Gross Value Added (GVA) growth was modest, the RBI said. GVA is defined as the measure of the total value of goods and services produced in an area, sector or industry. So, a higher GVA growth value is good for the economy. 

Impact on private consumption

Automobiles, consumer durables, FMCG and real estate are well-known cash intensive sectors. Naturally, they were affected by demonetization. In the month of November, sales in the automobile sector declined by 5.5% year-on-year. The poor run continued with an 18.7% and 4.7% decrease in the months of December and January. However, the sector bounced back quite well in the subsequent month with a sales growth of 0.9% YoY. However, the consumer durables sector was not as affected. It

witnessed an increase in demand after demonetization. GDP data shows that Private Consumption Expenditure (PCE) increased to 10.1% in the third quarter ended December 2017, from 5.1% in the JulySeptember quarter. PCE is the expenditure incurred on consumption of goods and services by households across the country. 

Positive impact in the medium-long term

While demonetization has certainly had some amount of negative macroeconomic impact, this is not long lasting, as per the RBI report. With remonetization of the currency notes and lifting of cash withdrawals, banks can now go back to the pre-demonetization rules. Normalcy can, thus, ensue. But more importantly, demonetization is expected to have a positive impact in the medium-to-long term. People could shift towards digital payment ecosystem. This can help reduce black money and also include more sections of the country in the formal financial sector.

RBI says 99.3% demonetized notes were returned; major points from central bank's annual report

The Reserve Bank of India in its annual report has said Rs.15.31 lakh crore out of the total Rs.15.41 lakh crore demonetized currency have returned to the banking system. The central bank said 99.3 per cent junked notes were deposited in banks, while 0.7 per cent notes worth Rs.10,720 crore couldn't be traced. Critics say the numbers prove that demonetization was a big failure. PM Modi had scrapped Rs.500 and Rs.1000 notes in a surprise announcement on November 8, 2016.

Here are the main points related to demonetization the RBI has highlighted in its annual report for 2017-2018: The value of banknotes in circulation increased by 37.7 per cent over the year to Rs.18.03-lakh crore at end-March 2018. The volume of banknotes, however, increased by 2.1 per cent. This is in sharp contrast to the government's push for digitization and a less-cash economy. In value terms, the share of Rs.500 and Rs.2,000 banknotes, which together accounted for 72.7 per cent of the total value of banknotes in circulation in March-end 2017, increased to 80.2 per cent in March-end 2018. The after-effects of demonetization continued in 2017-18 as well. The RBI says the indent for 2017-18 was higher by 9.1 per cent as compared to last year. However, the supply of banknotes was lower than the previous year. During the year, 2,700 crore pieces of banknotes were disposed of as against 1200 crore

pieces last year, mainly on account of accelerated processing of Rs.500 and Rs.1000 notes. The RBI said the humungous task of currency management, including remonetization, processing and reconciliation, was achieved in record time. One of the aims for demonetization was to fight the fake currency problem. According to the RBI data, 522,783 pieces of counterfeit notes were detected in the banking system in 2017-18. Of the total fake notes detected, the share of such notes detected by the central bank was higher at 36.1 per cent in 2017-18 as compared to 4.3 per cent during the previous year. The total expenditure incurred on security printing during the FY18 stood at Rs.4912 crore as against Rs.7,965 crore in 2016-17, says the RBI. The amount was higher in FY17 due to demonetization, which forced the RBI to print more new notes.

Demonetization: Problem of plenty for RBI as banks park record Rs.4.32 lakh crore The central bank could be running out of securities to offer banks against their overnight deposits Already strained meeting the pressure of supplying fresh notes to banks, the Reserve Bank of India (RBI) is now seeing its balance sheet getting impacted due to a deluge of excess liquidity that the commercial banks are parking with the central bank every day. RBI could be running out of enough securities to offer banks against the overnight deposits and experts say the central bank now urgently needs policy measures to protect the financial stability of its books. Banks on Monday parked a mind-boggling Rs.4.32 lakh crore of their excess liquidity with the central bank. Before the demonetization move, banks used to deposit under Rs.5000 crore of their excess liquidity in RBI’s reverse repo window. On Monday, netting off for borrowings done by some banks through the liquidity window, the surplus fund parked with RBI was a record Rs.4 lakh crore, data released on Tuesday showed. This could only increase in the coming days as people are still queuing up to deposit their old notes at banks and the government still has restrictions on withdrawals. When banks deposit their money with RBI, the central bank offers government securities of equal value. Therefore, RBI must have offered at least Rs.4 lakh crore of bonds to banks on Monday. RBI is also one of those rare central banks in the world that sets aside bonds against the government’s cash balance with the regulator. The central bank does not disclose the value of the cash balance kept on its books, but in a liquidity surplus scenario, the amount is always at least Rs.1 lakh crore, said an economist who did not wish to be named. However, as of June 2016, RBI’s total bond holding was only Rs 7 lakh crore. This indicates that the central bank is left with a thin buffer of bond holdings on its books, which is inadequate. Government bonds are the highest rated instrument in a country and is the safest asset class. A central bank always has to carry adequate amount of such bonds for its own financial

stability. As more deposits of old notes come into banks, they will tap this window, which will stretch RBI’s bond holding. Experts say that a central bank can get around this issue. For starters, it can increase the cash reserve ratio (CRR) of banks. Banks need to maintain four per cent of its deposits as cash without earning any interest on it. The central bank can also issue bonds under market stabilization scheme (MSS) to suck out the liquidity. However, every year the central bank fixes a ceiling on the amount of these bonds. The provision for this year is only Rs.30000 crore. “Expect a very steep CRR hike by RBI. It has to protect its balance sheet at any cost,” said a former RBI official.

Impact of demonetization on banking sector :

The All India Bank Officers Association (AIBOA) had given a call for demonstration against the problems that various banks and their employees were facing due to demonetization. Pointing out that the banking system itself is losing credibility because of frequent changes in RBI/government policies, AIBOC General Secretary Harvinder Singh said customer dissatisfaction is increasing because of chaos and confusion created in implementation of the scheme. Bank employees are feeling increasingly targeted in the face of public anger. The constant notifications and the lack of cash provided have led banking establishments facing the wrath of clients. Banks staff members serve the people and are working overtime to keep their commitments, but are helpless when they do not get enough cash to meet the minimum requirement of the customers. The government’s constant flip-flop on exchanging and depositing old cash notes in the bank branches, besides changing the limits on cash withdrawals has also created lot of confusion among the people. Bankers know banking best so they should be not involved in questioning for accepting deposits. Further, no accountability should be fixed on the bank officers in this respect as they are plunged with a job not anticipated of them. It is true that there are some black sheep among the bank employees and officers but just because of that one cannot paint all of the bank personnel and officers with one tainted brush. Apart from the given problems the banks’ staff have to face with some unruly customers. It is commendable that they are serving their customers with a smile and are also working overtime without extra wages. Public sector bank officers are being subjected to the anger, anguish and wrath of customers or general public due to short supply of currency notes to the banks. The banks have been at the receiving end of much of the troubles, leading to a deterioration in bank-customer relationships, with increased reports of violence against banks and bank employees as public frustrations grow. There is acute shortage of Rs.100 currency notes and hence even the recalibrated ATMs are not able to dispense cash to the customers. The banks have rightly demanded increased transparency in the cash flow and called on the RBI to ensure the protection of bank employees. The RBI authorities should assure the supply of adequate cash to all banks and branches so that ATMs are restored without further delay. There should be transparency in cash supply to banks by the banking regulator without any discrimination. Even Prime Minister Narendra Modi has appreciated the commendable work done by banks. Many have worked honestly during the recent crisis after demonetization. While the culprits deserve severe punishment those who have worked hard should be

compensated. Does anyone talk about the unlucky persons who lost their lives due to stress and strain after standing in the queue or working behind the counters? Government should also take care of their kith and kin and provide adequate compensation.

• Increase in Deposits: Demonetization has increased the deposits in Banks. Unaccounted money in the form of Rs.500 and Rs.1000 were flowing to the Banks and the sizes of deposits have been increased. It helped the banks to grab the deposits and increase their deposits. Bulk of the deposits so mobilized by SCBs have been deployed in: (i) reverse repos of various tenors with the RBI; and (ii) cash management bills (CMBs) issued under the Market Stabilisation Scheme (which is a part of investment in government securities in the balance sheet of banks). Loans and advances extended by banks increased by Rs.1008 billion. The incremental credit deposit ratio for the period was only 18.2 per cent. Additional deposits mobilised by commercial banks have been largely deployed in liquid assets. • Fall in cost of Funds: Over the past few months, the deposits are increased. It led the banks to keep a major part of deposits in the form of cash deposits. PSU Banks have a lion share (over 70%) of the deposits and biggest gainers of the rise in deposits, leading to lower cost of funds. Surplus liquidity conditions have helped facilitate the transmission of monetary policy to market interest rates. Post demonetization, several banks lowered their domestic term deposit rates and lending rates. The median term deposit rates of SCBs declined by 38 bps during November 2016-February 2017, while the weighted average term deposit rate of banks declined by 24 bps (up to January 2017). Combined with the sharp increase in low cost CASA deposits, the overall cost of borrowings declined, allowing banks to reduce their lending rates. • Demand for Government Bonds: After sharp rise in deposits on post demonetization, banks started lending such surplus deposits to the RBI under the reverse repo options. PSU Banks, particularly, deployed excess funds in government bonds. The return on bond investment is likely to add 15 to 20 per cent increase in the earnings of banks. • Sagginess in Lending: Lending growth of the banks is considerably less even after demonetization and its impact of growth in the amount of public deposit. Banks have tried to lend the money to the needy group by reducing their interest rates, but it shrunk over the last few months.

Opening of Jan Dhan Account Post-demonetisation, 23.3 million new accounts were opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY), bulk of which (80 per cent) were with public sector banks. Of the new Jan Dhan accounts opened, 53.6 per cent were in urban areas and 46.4 per cent in rural areas. Deposits under PMJDY accounts increased significantly post demonetization. The total balance in PMJDY deposit accounts peaked at Rs.746 billion as on December 7, 2016 from Rs.456 billion as on November 9, 2016 an increase of 63.6 per cent. As there were reports regarding the use of these accounts to convert black money into white, the Government issued a warning against the misuse of such accounts.

Push to Digital Banking Cashless economy is one in the flow of cash within an economy is non-existent and all transactions have to be through electronic channels such as direct debit, credit and debit cards, electronic clearing, payment systems such as Immediate Payment Service (IMPS), National Electronic Funds Transfer and Real Time Gross Settlement in India.

Benefits of Cashless economy 

Reduced instances of tax avoidance because it is financial institutions based economy where transaction trails are left.

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Curb generation of black money.

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IT will reduce real estate prices because of curbs on black money.

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It will place universal availability of banking services to all as no physical infrastructure is needed other than digital.

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Reduced cost of printing notes, instances of their soiled or becoming unusable, counterfeit currency.

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Reduced costs of operating ATMs.

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Speed and satisfaction of operations for customers as no delays and queues, no interactions with bank staff required.

Digital transaction platforms

• UPI: Unified Payment Interface (UPI) allows you to make payments using your mobile phone as the primary device for transactions, through the creation of a ‘virtual payment address’, which is an alias for your bank account. UPI was launched by the National Payment Corporation of India (NPCI). • BHIM App: The Bharat Interface for Money (BHIM) in an initiative by the Govt to enable fast, secure and reliable cashless payments through mobile phones. BHIM is Aadhaar-enabled, inter- operable with other Unified Payment Interface (UPI) applications and bank accounts, and has been developed by the National Payments Corporation of India (NPCI). This seals the government’s push towards digital payments after the demonetization that resulted in the scrapping of high-value Rs.1000 and Rs.500 currency notes. • Aadhar Pay: There are lots of payment apps in the market. These are the UPI apps, SBI Pay, Paytm, Phonepe, Freecharge, mobile wallets etc. But, the Adhaar Payment App is special as you can pay through the Adhaar Payment App without phone. It is possible because you the customer does not require the app. The merchant or a person, who want money, have to arrange a smartphone, app, etc. The payer don’t require anything. This app is made for the merchants and shopkeepers. Customer would only enjoy its benefits. The Adhaar Payment Appuses your fingerprints for the authentication. On the basis of this authentication, the money ispaid from your Aadhaar linked account. • IMPS: Immediate Payment Service (IMPS) is an instant interbank electronic fund transfer service through mobile phones. It is also being extended through other channels such as ATM, Internet Banking, etc. • POS terminals: A point-of- sale (POS) terminal is a computerized replacement for a cash register. Much more complex than the cash registers of even just a few years ago, the POS system can include the ability to record and track customer orders, process credit and debit cards, connect to other systems in a network, and manage inventory. Generally, a POS terminal has as its core a personal computer, which is provided with application-specific programs and I/O devices for the particular environment in which it will serve.

• USSD: USSD (Unstructured Supplementary Service Data) is a Global System for Mobile (GSM) Communication technology that is used to send text between a mobile phone and an application program in the network. Applications may include prepaid roaming or mobile chatting.

Positive Impact on Banking Services : The biggest beneficiary of this policy will be the banking sector. This is mainly due to the queues of people depositing cash in the banks – which will result in substantial liquidity with the banks. As the deposits with the banks will increase, so will increase the CASA, which will increase the Net Interest Income and the Net earnings of the banks. However, this will not be abnormally high since the RBI has increased the CRR in the short term to mop up some of this liquidity. This way the banks get funds at no or very low cost (interest). Banks do not pay interest on the current account deposits and pays a very low % of interest on savings account deposits. Hence, it is a good measure to get deposits at no or very low cost. As the banks get a lot of liquidity in their hands, they are expected to enhance the borrowing cycle by lending the money at a lower rate of interest. Hence, the interest rate on borrowing will lower down. Banks have witnessed an unprecedented surge in deposits post demonetization. Net increase in deposits for banks between 28th October and 23rd December was INR5.23 TN which was almost 2X of deposits received during previous six months of the financial year. As a result, YoY deposit growth had spiked to 14.5%, in mid-Dec‟16, vs. average ~10% YoY growth before demonetisation – almost 50% increase in the growth rate. Deposits in no-frills accounts (Jan-Dhan accounts) have increased by 56% post demonetization from INR456 TN to INR710 TN with average balance per account increasing from INR 2,330 to INR 3,570. However, the demonetization move did not significantly attract previously unbanked customers to open new accounts (only seven million new no-frills accounts opened on a base of ~300 million no-frills accounts). The implication of the action has been that it may lead to a more „active‟ customer base for banks in the future. There has been a stark difference in the performance of banks in garnering deposits during the demonetization drive. Banks that had a larger physical footprint (branch network, ATMs), e.g. State Bank of India, HDFC Bank, Punjab National Bank, gained a disproportionate share of deposits compared to others and they now have an advantage in their funding profile. There have been notable performances from the likes of IndusInd Bank, IDBI Bank and Kotak Bank.

Negative Impact on Banking Services NBFCs and microfinance institutions (MFIs) are under severe stress as their collection cycles (mostly in cash) have gone awry post November 8. Most NBFCs and MFIs have announced „collection holidays‟ till such time there is sufficient money in the system. The government‟s demonetization drive may puncture the earnings of most banks this quarter. With most staffers handling the Rs.500 and Rs.1000 note deposits, exchange and withdrawals, “revenue-yielding” operations such as vending loans and crossselling investment products have taken a backseat in most banks. The earnings of banks may take a hit in the third and fourth quarter. We may not see loan book growth as most banks are busy facilitating the demonetization process. They are not aggressively selling a lot of credit products now. That apart, the SME and real estate sectors, to which most banks lend a significant part of their book are in a state of major flux. During demonetization, some SME businesses had seen their sales drop by 50-80 percent and could default in their installments to banks. This led the banks to consider it as NPA and affected its level in banks. Bank Employees were put under pressure and overtime work environment. It depressed them and kept imbalanced life style. Few cases were found where the employees committed suicide due to work pressure.

Demonetization has effected the human resources of banks working at different levels in various manners -

Physical Every human being has the capacity to work at stretch but not 24*7. Physical effects of over-load work can be observed from the face & body language of the employee. From time to time some of the anchors of National TV channels showed physical /mental position of employee especially female employees who were dozing/ dodging, taking some relief from heavy work load even on counters itself. In totality there was adverse effect on physical body of bank employee working at each level. Health It is an old proverb that sound mind is found in sound body. There are some basic prescription for sound body ie timely diet, exercise & rest for minimum period. During the demonetization some of the employees had to remain in bank up to mid night which affected their health. Beside some of the old, stacked specified banned notes which were received by banks for deposit & change had fungus and some health hazard germs germinated to cope with such notes, note counting machine were not helpful as their mechanized system cannot separate such note. On a national channel during Prime Time discussion, Bank representative and Doctor were interfacing & doctor was of the view that in such situation asthma, allergy and lung related problems can be there. Social Demonetization was a bolt from blue as “man is a social animal” rightly described by Aristotle. During any emergency in society bank employee cannot keep aloof. All of sudden the decision of demonetization was announced each & every person rushed to bank either to deposit or withdraw his or her currency. Long queues of general public arrived in a dramatic way. Clients of bank who visit their branches, relatives, neighbors known & unknown people started to contact the bank employees. We have to appreciate the bank staff in totality that first come first service was provided for cash depositors SBN (Specified Bank Notes) enchasing or own funds withdrawals without favor. As we Indians are known for indiscipline where we see we will succeed tried to use foul language even threats & some areas /parts of the country boycott the bank employees. Though all these stressful effects were temporary, but during these 50 days it was very difficult to maintain cordial social relationships.

Management Management is not acquired by training or seniority but it is a process of learning especially in the days of crises. In normal times management is not tough but where there is huge crowd, expectations are high, resources are limited & rationing is there, system is to be adhered without any caution/penalty & to make the programme 100% successful. Bank employees, though they were working as front-line custodian/ liasoner/ representative. Bank employees learnt the basic rule of management of controlling the crowds service to all sections of the society, how to rationing the scarce commodity so that maximum clients can be served. Technology Modern age is dominated by new technology. Banking industry was using obsolete technology related to core banking solution which covered only normal banking activities. Later on Debit/Credit Cards came into vogue with arrived of private sector banking but their technology was a bit upgraded than public sector banks. Debit/credit introduction goes to their credit. E-Wallet Technology was invented in Indian banking industry & its need was felt during the process of demonetization. Demonetization has created flutter in HR polices of banks, now banking industry is not of old days clerical industry it is converting into high professional and technical experts industry. Standard Charted Bank started to search Indian talent for global HR role. Ms Tanuj Kapilashrami is newly hired technologist global head of Standard Charted Bank. Many more technical experts are in line from Indian banking industry to shift to International Banks. Demonetization has opened gates for fresh -relook policy on HR for climb to top in Banking Industry. A latest survey reported in daily Economic Times during the peak time of demonetization where 750 employees of different banks were contacted out of which 60% say that HR managers of banks feel that soft skills are very significant while hiring employee (Times Job Survey). Different management levels of banks i.e. Junior Manager 35% Middle Managers 40% and Higher Managers 25 % agree that technology is important for the new entrants in banking industry. New Trends in banking have emerged as banking is going the UBER way, designing entirely a new set of products for digital first & mobile only, there will be host of opportunities for those with strong, numerical analytical and computing skills. At present 27 public sector banks 33 private sector banks & 43 Foreign banks are operating besides more than 2.2 Lac ATM'S & their service providers, there is huge demand of highly skilled human resources. Business Growth-cum-Investment In normal course of banking business, the operational staff with budgetary allocation is required to market the need for raw material of banking industry i.e. Deposits. Deposits to be mobilized not of high cost but of low cost. In case of imbalance of demands -supply, banks look towards RBI. Now the result of

demonetization is that banks are flooded with deposit that is at a very low cost. Now the problem before banks is to utilize the available resources with a very judicious & prudent way to avoid further increase in the stressed assets of banks which are already near Rs.8.00 lac crores & to avoid the exploitation by corporates & fulfill the needs of higher employment generating sectors of the economy. Now banking industry will require highly qualified financial analysts, sector related researchers and good manager. ie employment opportunities for all interested in this industry. Credibility of Banking Industry i.e. HR As demonetization has given unexpected funds at lower cost. Now the responsibility of the banking officials working at any levels to take care of a. Safety & Security b. Investment c. Keep away technology related risks Banking officials at operational level ie credit department, technical support staff and Bank boards should be extra cautious to avoid any wrong decision which can lead to lower growth in economy. Secondly bank official to be extra vigilant about cyber attacks just 32 lac ATM data theft, Ewallet thefts, PAYTM frauds. In early February 2016 where bank lost more than $81 million. All this creates the opportunities for new HR personal as well as existing official to get expertise in technology which will put upon them extra burden, stress & opportunities also. Regulatory compliance Demonetization has put extra stress upon the banking officials for management of cash including to check its leakage /theft as it is the property of RBI. Secondly to remit timely SBN with RBI or its established currency chest with proper records of depositors and daily reporting of data /detail related to demonetization RBI'S instructions which were changed from time to time relating to exchange of notes, deposit of notes and distribution of fresh notices especially in view of supreme courts observations ie “Bank must ensure minimum payment”. HR portfolio worked under physical & mental stress and to avoid any penalty upon banks in case of Non-compliance of regulators guidelines as well as Govt. of India directions issued from time to time during the given 50 day time. Easy Money Haunt and Fear of raids Bank employees are human beings they cannot keep aloof from society as they are serving the society. Demonetization was the decision of government of India with ultimate aim to stop corruption. During this process some segments of the economy find the leakage way to obtain /gain easy money. To make a grand success to their this ill-designed some persons put into action to approach/method to specified

Banned notes so that these can be exchanged at commission basis which varied between 20% -35 % as reported in electronic & print media. Such scrupulous elements sought help from a few bank employees who helped there with an aim to make easy money. They became prey to “Small-Time Gains” Law forcing & enforcement agencies have raided branches of various banks unearthing unauthorized cash disbursal & fake accounts Axis bank had to suspend 24 employees. M.D & CEO Shikha Sharma admitted that we had some bad apples similarly some employees of other banks were also suspended. RBI had to ask banks to probe unusual patterns in cash management & currency chests inspection to check unauthorized exchange of SBN. Raids increased stress on long hours at work besides this disciplinary action even for unintentional mistake. Had a very bad effect on working employees which affects their efficiency. Debt Recovery Stress As we all know that banks especially public sector banks financial condition is going bad to worse as the current figure indicate that NPA'S have touched near Rs.8.00 lac crore which is alarming such huge stress that assets are affecting very badly the profitability of the banks and the international banking standards are far away from public sector banks. In comparison to public sector banks the status of private Sector banks is slightly better. The reasons for this may be different in each case but one thing is common that top executives of the banks and other different level functionaries are under stress to recover the public money to enable the banks to annual dividends to RBI. Operational level management is under stress to follow the suit filed cases in different DRTs (Debt Recovery Tribunals), action under SARFEASI Act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002). Due to demonetization, no follow up of NPA'S could be done to the desired extent. Only cash management & to avoid public demonstration & fear of which hunt on account of enforcement agencies drew their attention. The other side of demonetization indicates that there is unexpected recovery in small loan accounts which is a good report for banks. Wage Settlement Linked Profitability TANUJ KAPILA SHRAMI who is a leader in global HR expressed her views about HR policies and another author expressed views on New Trends in Banking whereby he/she expressed job opportunities linked with wage settlement in Indian Banking Industry. In the Indian Banking system a wage settlement with bank central negotiating agency IBA after every five years is settled. Such settlement covers all categories of employees. A new discussion for experts domain is hovering that performance linked wages settlement be placed there, reason being experts hesitate to enter afresh in Banking industry, reason being low wages in comparison to their counter parts in private sector. Demonetization restricted rather stopped to book new business of loans and advances thus profitability will be on lower side during these last 3/4

months other income. Income from non-monetary services. i.e. Card Fee, fund settlements, remittance is already squeezed. Government of India ordered free ATM and other digitalization services without announcing any compensation. As stress assets have already stopped to generate revenue rather costs have been increased by way of large amount of funds lying unused resulting further lower rate of interest on loans and advances. Thus Net Interest Margin (NIM) will be on lower side. End result lower profit and even banking industry may be in danger. Though demonetization effect may be part yet it will effect on wage settlement which keeps at center the profitability of Member Banks. Thus future wage settlement may move to rough weather. In such circumstances new talent will not prefer to join banking industry. Top Executives may not find good place in banking industry on account of lower wages in comparison to their counterparts in another sectors. This adverse effect of demonetization will be seen in the next wage settlement which is due during last quarter of current financial year. Remonitization More than 86% value of the total currency value which was in circulation in Indian economy was suddenly withdrawn by Government of India on 8th Nov. 2016. It is an ancient habit that people used to deal in cash. Cash is preferred in comparison to other modes of payments. The electronic and ~ 680 ~ International Journal of Applied Research print media highlighted the difficulties faced by people and stress and hardships including threats, demonstrations beard by Bank employees during the specified period of 50 days. It is a human nature that habits do not change overnight, so re-monetization to bring normalcy in economy was the sole and important tool. At present there are 4 authorized printing centers, which require 3-4 months to fill up the SBN gap. Thus Bank employees had to suffer till the end of February 2017. Secondly, now the enforcement agencies, regulatory and tax authorities who started their job to scrutinize the JAN DHAN accounts, new opened accounts and high deposit receipt account since 8th Nov. 2016 will be analyzed. This will create further stress to bank employees who indulged in illegal activities. Banks will hire forensic experts, background screening firms, and mystery shopping firms. Centrally compiled data indicates approximately 15% increase in complaints against banks for misbehavior, deficiency of service and vigilance related issues. Till required level of remonstration has not been achieved, stress both mental as well as physical will remain upon banks staff which is the backbone of banking industry.

How Demonetization is Affecting Bank employees ? The demonetization move by Prime Minister Narendra Modi caught the nation off guard on November 8, 2016. The discontinuation of the ₹500 and ₹1000 notes as legal tender to fight the problem of black

money and corruption plaguing India for years made every person in the country wonder about what was about to follow. Naturally, the week saw heated debates over the move, detailed analysis and extrapolation of what to expect in the near future, and of course serpentine queues outside banks and ATMs. This bold move against black money has seen mixed responses over the week. While a portion of the population welcomed and supported this step, there were some who, citing the perils to the common man as one the reasons, condemned the shift in the economic strategy. However, amidst the ensuing chaos, the challenges faced by a small segment of the population, the bank employees, have been seemingly ignored and sidelined. Bank officials across the nation are giving their best to ensure a smooth transition. Right from the day after the announcement, the bank officials have been putting in extra hours every day to try and conduct as many transactions as possible. People’s perception of the whole situation seems to be limited to the chaos and queues outside the banks. For employees at the bank, work doesn’t finish once the counters are shut. Considering that banks have the responsibility of protecting and securing the money, it goes without saying that exercising due diligence and keeping protocols intact is something that cannot be compromised. The employees need to cross-check and close every single transaction before calling it a day. They are not only working overtime but are sacrificing their weekends and holidays, family time and sleep. Ensuring the comfort of the general public has become the centre of their lives. I know it is difficult for us when we’ve been standing in queues for long hours, braving the pollution and the heat. However, it does not seem fair to vent our frustration and show no respect for the people who are trying their very best to deliver. Like any change that trickles down through the society over a period, the current situation will stay for the next few days. Smooth and gradual phasing out of the chaos is something that is in our hands. As educated and responsible citizens of a democratic India, it is our responsibility to come together as one unit, without playing the blame game, and support the government in this heroic attempt to rid the country of money laundering and its far-reaching impacts. All of us are in the same situation; we need to sit tight, have patience and aid the process in every way possible. The government’s motivation behind this move was never about targeting a certain group of people who are a part of the black money muck. Instead, the aim has been to rid the nation of economic distress and thereby protect individuals at large. To criticize the efficiency of the officials working behind the scenes would be like standing in the way of our own country’s growth story. Hence, respecting and appreciating the tireless efforts of the bank officials in front of us could be our small contribution to the larger goal.

Bank Employees shouldered worst impact of demonetization, says Unions : The employees, say bank unions, bore the major brunt of the sudden decision announced on November 8 last year by the Prime Minister. Sanjay Das, Assistant General Secretary of the All India Bank Officers' Confederation, told IANS "Banking personnel were rigorously working towards recovery of bad loans before the announcement of demonetization, but the entire drive of recovery got derailed after the announcement as employees had to work day and night for giving service to depositors." The bank unions said that of the more than 100 persons, who lost their lives during the demonetization chaos, were bank employees and officers.  Das said that despite the enormous amount of extra work put in by the employees, very few were compensated. "Over 50 percent of employees and officers are yet to get their compensation for the extra work they did during the demonetization period," Das said.  According to C.H. Venkatachalam, General Secretary of the All India Bank Employees' Association, the whole experience had left "a big scar in the minds of bankers". He said a million bank employees handling 1,000 million people coming to branches to deposit old notes was certainly a big task. He said the bankers were abused by the general public for not disbursing new notes and diverting the same to others. "The RBI made matters worse by saying that sufficient number of new notes were disbursed to banks," he added. He said the bank managements were not bothered about the problems faced by branch officials. The Reserve Bank of India (RBI) also asked bankers to work on Saturdays and Sundays. Officials in the branch were in office till late in the evening. Although some clerical staff, he said, were paid overtime, officers were left out.  Pradip Biswas, General Secretary of the Bank Employees Federation of India, said that not only employees but even the banks had not been reimbursed by the government for the cost incurred on recalibration of ATMs.  Criticising demonetization, Biswas doubted that the whole exercise was done to unearth black money as claimed by the government. "The annual report of the RBI revealed that Rs.15.28 lakh crore, or 99 percent of Rs.15.44 lakh crore of scrapped notes, came back into the system after demonetization. Now the question arises: was the demonetization scheme designed to convert black money into white?" Biswas wondered. He said the government had described it as a fight against black money, funding of terrorist outfits and counterfeit currency. "But all their claims have fallen flat," he said.

 "The scrapping of notes failed miserably in addressing its objective of striking a blow against the black economy. Instead, the side effect of the note ban has impacted the banking industry adversely," said Das, who is also the West Bengal State Secretary for the union. The massive inflows of bank notes put a strain on the banks' daily operations and banking personnel were not able to focus on credit disbursement, which resulted in potential loss of banks' income, Das said, adding that bank credit growth came down to about 5.1 percent in 2016-17 from an average of 11.72 percent in the previous five years.  The apex bank too has mentioned that banks' preoccupation with exchange of notes and deposits was one the factors for low credit growth. "Credit growth touched a low in more than two decades on account of factors such as subdued state of economic activity, risk aversion of the banking sector... loan repayment by use of specified bank notes (old notes) and banks' pre-occupation with exchange of notes and deposits following demonetization," said the RBI's latest annual report.  D. Thomas Franco Rajendra Dev, General Secretary of the All India Bank Officers Confederation, said that, initially, they had welcomed the government's move: "But it turned out to be a nightmare for the bankers." He said people thought bankers were at fault for not disbursing the new notes, but "the RBI supplied new currencies only to private banks daily and not to government-owned banks".  Dev said the government should probe whether new notes found their way into the hands of industrialists and businessmen directly from the currency printing presses.  But some senior bank officers differ with the unions about the impact of demonetization on the economy in the long run. "Right now people are complaining, but one thing is certain that (huge) money has come into circulation. Banks have accessed low-cost deposits and, subsequently, lenders have reduced the lending rates," said Sanjiv Sharan, Executive Director, Punjab National Bank. One year down the line, economic conditions would improve, and with the government's thrust on low-cost housing and infrastructure development, credit demand would grow, he added. "For the time being it may seem that demonetization is disturbing the economy. But in the long run, it will help it," Sharan contended.

Challenges faced by the bank employees : Highlighting the suffering of bank employees during the ongoing demonetization scheme, the Indian National Bank Employees' Federation (INBEF) has requested Finance Minister Arun Jaitley to resolve the impasse for smooth uninterrupted service to the clienteles by the bank employees and also honor them with ad-interim relief in their wages and a wage settlement in 2017. In a letter to the Finance Minister, the bank employee union, says, "We submit that for last few days the employees of the bank has given their maximum output ignoring their family obligations. They have not bothered about their health, mental or physical fatigues, and tiffin or lunch and worked up to late nights to accomplish their social responsibilities towards distressed citizens. Bank employees and officers are treated as bonded labours under such circumstances and sorry to state that even today the same bank employee is ranking at the lowest rank when it comes to the wages in public sector undertakings (PSUs), including insurance companies. We hope that at least now, your good office as a gesture of goodwill will see that bank employees are immediately honored with add-interim relief in their wages and thereafter honorable wage settlement in 2017." The union also highlighted problems being faced by bank employees during the demonetization drive. As per the union, employees entrusted with duties of front door banking, are facing the following problems:1. Insufficient number of scanner machines to detect forged/fake notes. 2. Short supply of Rs100 denomination notes. 3.

Non-supply of new Rs.500 denomination notes.

4. Paucity of work force as well as machines to open sufficient number of counters to tackle the crowd. 5. Reasonable requirement of special counters to serve senior citizens, handicap persons as well as woman customers. 6.

Non-availability of relieving hands to enable them to attend natures call as well as have their tiffin.

7. Even female employees are asked to perform the duties by sitting late in the night without following the norms laid under Shop and Establishment Act where they are supposed to be escorted to their destination if they perform their duties beyond 8pm.

INBEF says, "Needless to mention, that the bank management has taken it for granted that whatever may be the position, the employees shall have to overcome all the hindrances. They are not bothered to introduce shifting duty hours to cope with extended banking and business hours. They are not taking any special care while asking woman employees to stay in the bank at late hours or provide refreshments to the employees who are compelled to stay at late hours. Of late, instructions has been given for cash compensation to officers for working in holidays and overtime to award staffs but the said instruction doesn't commensurate with 12-13 hours service rendered by the employees." "The non-functioning or partial functioning of ATMs has added woes to customers as well as bank staffs thus leaving the use of plastic cards a questionable matter. The unconcerned attitude of the Reserve Bank of India (RBI) cannot be condoned when it was in their knowledge that the trays of the ATMs has to be re-calibrated to accommodate new Rs.500 and Rs.2000 notes, which are of different size compared to the cancelled high denomination notes," the union says. Indian banks are facing a problem of plenty while millions of people are facing a physical cash crunch. The withdrawal of the high-denomination notes has driven people to collect all the cash lying at home and depositing it into the formal banking system. Over Rs.2 lakh crore has been deposited into banks ever since the demonetization of Rs.500 and Rs.1000 notes were announced on 8th November by the Prime Minister. Much of those deposits are being invested into government securities sending their yields spiraling downwards. The 10-year g-sec yield has dropped to levels of 6.44 per cent currently. Just before the demonetization announcement, yields were hovering around 6.8 per cent. Yields are expected to fall even lower as more physical cash in the economy finds its way back into banking channels. While banks are facing a problem of plenty on the deposit front, credit growth has been anemic. Corporate credit growth has been negative due to an over-capacity in the economy. Companies are still wary of drawing up expansion plans because demand has yet to tick up.

Retail borrowing is restricted to a few salaried individuals. Bank credit growth in the economy has trickled down to single digits of around 9 per cent, and is largely denominated by the retail segment. Now with nearly a third of the Rs.16 lakh crore cash that has been sloshing in the economy likely to come back into formal channels, bankers are likely to face a deployment problem. While government estimates suggest that over Rs.5 lakh crore of cash may not come back into formal banking channels, it still pegs the amount that would eventually come into the banking at around Rs.10 lakh crore. Even if about 50 per cent of that cash is eventually withdrawn for business and household expenses, there is likely to be at least around Rs.5 lakh crore for banks to lend next year. Bankers are, however, pointing out that the deploying the cash is no major issue, and that this is still early days as one still has to wait and see what the total deposits in the banking system will be in a few months.

Says K P Nair, deputy managing director: “We will not have a major deployment problem. If you have credit growth coming in, this money could become an accretion in your low cost funds like CASA. We will have to wait and see, because one has to look at what is the total deposit growth in the system.”

Bankers also point out that some cash deposits will again get rolled back into physical currency as demand for cash from households and businesses for working capital increases when systems normalize. Says Nair: “There are two parts. People have kept some emergency cash at home. People are deploying it, and partly exchanging it. So such cash eventually will get withdrawn back.” For now, bankers are deploying the cash into g-secs driving down yields in government securities. Meanwhile, the scramble for physical cash at ATMs and bank branches continues, and systems are working on overdrive to get cash to the market. Smaller denomination notes are in huge demand. Bankers are saying they are leaving no stone unturned in moving cash from banks with large cash hoards to places where they are needed.

Banks have also moved staff from administration offices to assist the front office in disbursing cash, and collecting cash. Says K P Nair, deputy managing director, IDBI Bank: “We have moved cash from branches to where we are anticipating demand. We airlifted cash in some places. We have to make sure cash reaches remote places as well.” Bankers expect that the situation will take about a month to normalize. Small denomination notes are in huge demand. The newer Rs.500 series notes are being released in the economy, and ATM machines are being recalibrated to issue the new notes.

5. CONCLUSION At the end of this research we can conclude that Demonetization has helped reduce black money, bribery and terrorism in India. By seeing the data collected over here, I can say that, this time demonetization has proven somehow more successful as compare to previous two. Wind has been change. People became more conscious about online banking. Bank employees had work continuously without taking day off. Their co-operation matters a lot. Though total black money had not been grabbed by this tool, this tool proves fruitful for at least creating fear in the minds of black money holders. It was compulsory for the Government to take some steps like demonetization to decrease corruption, terrorism, black money etc. People have faced inconvenience because of demonetization and they are not happy with it. It has not helped the bank employees as their workload has also increased because of it. The cash flow in bank has decreased followed by the decrease in Interest Rate and money lending. Demonetization has led to the increase in the use of plastic cards, online Banking, opening of new accounts, number of customers in the branches and the use of ATM. Banks won’t not be impressively wedged inside the long run, considering that the cash streams of the beneficiary segment square measure ordinarily inside the littler division. We tend to trust the aggregate measures taken to reign in dark money can enhance keeping money propensities, deliver cash and value based history the basic structure of the bank is increasingly in conflict with the changing product, delivery, and service needs of the customers the future belongs to financial service provider’s not traditional banks. The vast majority of large banks will create value networks. Doing so presents tremendous challenges. Banks will have to first develop a comprehensive distribution system that will enable customers to touch them at multiple points. Banks must also create performance measurement systems to assure the mix products and services they offer are beneficial to both the customer and the bank. With other service providers. Nevertheless, technology alone will not solve issues or create advantages. This technology needs to be integrated in an organization, with the change management issues linked to people resisting new concepts and ideas. It also needs to support a clearly defined and well communicated business strategy. Demagnetization is a weapon used by government to fight against corruption and black money. At the same time, it has brought changes in all the corners of the economy. Demonetization has badly affected the banks. Banned denominations were ploughed back and allowed the citizens to exchange with the banks. While exchanging, it disturbed temporarily and influenced its regular operations. Though it affected to a greater extent, it has paved the economy to grow in the years to come. Demonetization is a one step of many steps in fighting corruption, black marketing, and financing insurgency. However preparation for demonetization was lop-sided, and its impacts was terrible on Indian public. If 86% of

cash is taken out, with a meagre amount available, all market transactions have been killed. The people, who were targeted, did not come on streets, but common folk are out from their work places as well as homes. , Somebody put a parable on social net. For killing ten crocodiles, government pumped out all water from the pond results killing ten thousand fish in pond but Crocodiles walked off on dry sand. With an intention to rid the country of black money and dig out tax defaulters and black money holders, government has taken step to demonetized Rs.500 and Rs.1000 notes. This move will have major impact on the parallel economy but sudden announcement and failure to prepare in advance has creates temporary chaos and discomfort among the general public. Common Men are finding it difficult to buy with no money in pocket, wasting hours in queues which although could have been avoided if planned in advance. Though the process of demonetization laid down impact on business activity for small traders but the sentiments for governments move of demonetization was welcomed by small traders and they adopted disruptive new technology in payment mode by accepting more plastic money and virtual wallet. Direct to consumer segments had beard some loss of business but indicated that they were moving towards normalacy. The move by the government to demonetize old currency and replacing it with the new one has taken the country by surprise. The move was an effort to handle the threat of illegal money, corruption, terror funding and counterfeit currency. The decision regarding demonetizing the old currency was considered as a surgical strike against the undeclared money in the history of Indian Economy, it may be a move towards the cashless economy. The demonetization is followed by a liquidity crunch in the country, banks and ATMs across the country faced severe cash shortages with detrimental effects on various small business, agriculture and transportation. Currency ban by the government of India created chaos in shortterm as most people with old currency notes faced difficulties exchanging them in long queues outside banks and ATMs across India. The total value of old currency notes in the circulation was to the tune of Rs.14.2 trillion, which constitute about 86% of the total value in circulation. The black money has either been accounted by paying heavy taxes and penalties or has reached the bank accounts through direct or indirect channels. Demonetization would bring a positive impact on Indian economy as it encourages the digital mode of payment like E-wallets and apps, online transactions using E-banking, usage of plastic money etc. Demonetization is beneficial for the economy in the medium to long-term. Demonetization done by our honorable Prime Minister Modi last year was with the very good intention to reduce corruption and black money from the economy, bring transparency and greater formalization in the economy. This was why general public was with him and is still standing with his decision no matter how many hardships they faced during demonetization days and after it whether it was standing in the queues before banks, cash crunch or job losses. Now it is the responsibility of the

government to reap the benefits of it when all the cash that once was lying idle or with business persons has come into accounting. As government has already taken a step ahead by implementing GST, cancellation of registration of dubious 2.24 lakh companies, now moving towards others property to bring transparency to the economy. As this study shows, that economy is already in the state of a slump. Demand is not coming, so no new jobs and employment. Now it is the responsibility of the government to take the economy out of this slump by decreasing the taxes both direct and indirect, increase in public expenditure by starting new big infrastructure projects, etc. The government should move towards removing all obstacles coming in effective implementation of GST by being sensitive to businessmen problems, reduce taxes and stamp duties, giving booster does to MSME and unorganized sector so that the people who have lost their jobs or businesses due to demonetization may join back the formal economy and live a dignified life. If government wants to increase digital transactions in the economy it should provide proper e-economy infrastructure along with cyber security besides providing incentives of using digital transactions like no charges through payment of PoS machines or debit and credit cards, cash back through payment of digital transactions etc. if government apply all these measures in true sense not only economy will come out of slump but the pain of people due to demonetization will also be less, and the economy will move towards greater formalization with increased transparency and less black money.

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