Narendra Modi government has banned the legal status of Rs 500 and Rs 1000 currency notes in a bid to curb the menace of black money and terror funding. This move is bound to shake up the whole economy and is going to affect directly those who have stashed cash illegally. One of the biggest change which India is going to witness would be in its banking system. It would directly encourage people to resort to cashless measures such as mobile banking, online banking and card transactions. But it does not mean cash will entirely loose its value. In the short term, there is going to be short term turmoil due to the paucity of cash in ATMs and banks for legal tenders of the value of Rs 50 and Rs 100. Eventually this is expected that banks will be able to meet the shortage of Rs 100 notes.
The biggest question lies in how the banks will counter the sudden challenge in just two days. The RBI Governor Urjit Patel assured the press that “There will be no impact on the liquidity on the wholesale markets. If at all there is any, we’ll make sure that it’s addressed.” It remains to be seen how the banks such as SBI, ICICI, HDFC and others deal with the situation and supply their ATMs with legal notes.
The new announcement is expected to give birth to new business models in the financial technology domain. Transactions through wallets such as PayTM, MobikWik, Freecharge and others may increase.
Trupay a UPI based bank to bank payment solution has welcomed the bold move by the government of stopping the circulation of Rs. 500 and Rs. 1000 currency notes. This move by the government will not only make a big dent to the hoarders of illegal cash but will be a big boost to the digital economy. This move by the government will sensitize people about the superior modes of digital payments apart from cash.
“During the changeover period of phasing out old currency notes we really believe that a lot of people will move towards digital payments options due to curbs on roll out of new currency. A big chunk of population will move towards digital payments not out of choice but perforce with this bold move by Mr. Modi” said Rahul Gochhwal, Co-founder, Trupay.
“We welcome the Government’s bold and courageous move to weed black money, which will have significant long term benefits for the economy. With this, the quantum of India’s economy moving through the digital pipes will witness massive growth. Both Snapdeal and Freecharge are committed to supporting all such initiatives.” reacted Kunal Bahl, Co-founder & CEO Snapdeal.
Sathvik Vishwanath, CEO and Co-Founder, Unocoin, said “The intentions are good but very difficult to achieve. If going cashless is the only way forward, certainly the bitcoin which is border less trust less and transparent currency makes more sense”.
Manavjeet Singh, CEO & Founder, Rubique, commented “This is a promising move made by the government towards cashless economy. This will boost innovation in the nascent electronic payment industry. Without doubt, this will bring down frauds and thefts and costs of printing cash. A great blow to black money. If executed well, the costs of doing transactions between buyers and sellers will lower significantly by 2019.”
Ranjit Punja, CEO &Co-founder, Creditmantri, said “Sweeping step taken by the PM, but this should have a positive impact in curtailing black money and reducing corruption. Likely to cause some temporary hardship, and with the introduction of the Rs. 2,000 note, along with the security and tracking features, currency will be used as intended.”