Nearly 100 major groups and several prominent experts have attacked the NDA government for the manner in which the banks and economy are being wrecked due to the impact of demonetisation followed by the ongoing cash crunch.
Nearly 100 major groups and several prominent experts have attacked the NDA government for the manner in which the banks and economy are being wrecked due to the impact of demonetisation followed by the ongoing cash crunch. In an open letter released on Friday through National Alliance of Peoples Movement (NAPM), they have pointed out that since past few weeks, banks ATMs in many states have run dry, bringing back nightmares of the huge cash crunch experienced post-demonetisation of Rs 500 and Rs 1000 notes on November 8, 2016.
Though they cite several reasons behind the present — the second cash shortage in barely 18 months — they highlighted the scare due to the Financial Resolution and Deposit Insurance (FRDI) Bill, no recalibrating ATMs to hold the new banknotes, hoarding to win the upcoming elections and increase in cash withdrawals to avoid excess charges levied on the fifth withdrawal. Despite RBI claims that there is sufficient cash – Rs 125,000 crores — in reserve, experts who have analysed data argue that enough currency is not in circulation as the rich are hoarding cash.
The worst hit is the informal sector, poor families and others entirely dependent on daily cash and cash-credit, though it has yet to recover fully from the impact of demonetisation. Such frequent disruptions in cash flow lead to a systematic destruction of the economic security of millions and low industrial growth, coupled with high unemployment, has worsened matters. Added to this is the high rate of bankruptcies of companies, especially in key manufacturing sectors, which are automating to reduce costs and thereby leading to job losses and further distressing the working classes.
All this when the entire banking sector is strangled by gargantuan bad corporate debts or NPAs and the trust in the public sector banks (PSBs) is further shaken by the FRDI Bill which has a ‘bail-in’ clause permitting deposits to be turned to equity to deal with massive bad debts. “This means peoples’ small savings are not safe even in PSBs… All this reflects the sad state of affairs of the manner in which PSBs are being misused and the mad rush of this government to join the league of cashless countries in only adding to this current problem,” the statement said.
The signatories pointed out that in many western countries, due to cashless retail transactions, ATMs are being shut, but in India, even though cash transactions are the predominant mode of transaction, banks are shutting their ATMs. Since January 2018, as per data, banks have shut down an average of five ATMs per day across the country and 1,695 ATMs have been closed between March 2017 and February 2018.
In fact, six of the states, including Bihar and Andhra Pradesh, now facing the worst cash crunch have also witnessed a rapid reduction in the number of ATMs. The situation is looming whereby people cannot access cash, either through banks or ATMs with slow extension in the banking system to the far-flung rural areas and tier II and III towns. They referred to the new RBI guidelines compelling the Confederation of ATM Industry (CATMi) to seek around 25 per cent enhanced service charges on ATM cash or non-cash transactions. The issue was first highlighted by IANS (April 18, 2018).
The statement has pointed at the IT Department asking ed banks to pay tax for charges recovered by banks from customers not maintaining a minimum balance and levied by the DGGST, it is being levied in retrospect, biting banks already reeling under massive losses. Recently, the IT Department has sent notices asking banks to pay tax, penalties and interest on free services offered to customers, from 2012 onwards, which would amount to a whopping Rs.40,000 crores, which the banks would pass onto the customers.
This is despite the fact that Indian banks earn minimum 6-9 per cent on current and savings account deposits as compared to 1.5-2.0 per cent worldwide, which alone should be reason enough to provide all banking services free to our customers. “However, private sector banks earn profits from these and PSBs use them to cover their NPAs,” the statement noted. They urged the government to withdraw the FRDI Bill, remove all charges/penalties on basic transactions on customers and banks and formulate a policy to recover debts owed by corporate houses, among other measures. The statement has been signed by top organisations, activists and experts from all over India.
The original story, published in the Financial Express, can be accessed here.