Live Mint: 100 days after demonetisation, have digital payments become more popular?

100 days after the government scrapped 86% of the currency in circulation, where do digital transactions stand? Has the disruptive policy shock been able to change in people’s transaction habits?

Data from the Reserve Bank of India’s electronic payment system indicators can help answer this question. RBI’s monthly database has information on volume and value of transactions through all sorts of payment systems. The digital payment systems commonly used in day to day transactions are: credit and debit cards, mobile wallets, mobile banking and unified payments interface (UPI).

Except for UPI, for which there is data only from November 2016, it is possible to calculate year on year increase in total and average value of transactions for each of these methods. Year on year growth in total value of transactions has displayed a positive trend for all methods except debit cards. The negative growth in value of transactions through debit cards is probably a reflection of ATMs still running dry, as ATM withdrawals accounted for more than 90% of total value of Debit Card transactions before demonetisation. Mobile wallets saw the highest percentage increase in the value of transactions among these methods. Transactions using the newly introduced UPI have increased from Rs90 crore in November 2016 to Rs1,659 crore in January 2017.

This happy picture of increase in value of digital transactions is moderated by the trend in average values of transactions through these methods. Except mobile banking, there has been no year on year growth for most transaction methods in terms of average value of transactions. This is understandable as the cash crunch forced people to go digital for carrying out even small-value transactions.

What is to be made out of these trends? As pointed out previously in a Plainfacts column, most electronic payment methods saw a decline between December 2016 and January 2017, implying that the high growth in digital transactions in the immediate aftermath of demonetisation might not be sustainable. Still, any final verdict on demonetisation’s effect on popularity of digital payment methods should be withheld till the re-monetisation process is complete, .

There can be a useful benchmark to revisit this question at a later stage though. Cash withdrawals through debit cards at ATMs were way ahead of other digital transaction methods such as use of debit/credit cards, mobile wallets or UPI in October 2016, the last month before demonetisation. Using ATMs to withdraw cash had been the default option for people to take care of their transaction demand for money in the pre-demonetisation period. It will be interesting to see if these numbers change significantly once liquidity supply is back to normal.



Demonetization Demystified

Free Seminar at India House on Managing Your Currency, Wealth and Taxes


HOUSTON – Demonetization is the latest of financial dilemmas facing NRIs, who hold Indian currency, bank accounts, real estate and other assets in India.

How do you get answers from impartial experts, who are not trying to sell you additional financial products?

India House, in association with NRI Tax & Wealth Advisory and Share Our Secrets (SOS) Mentorship Program, is pleased to host a free seminar at 7 pm on March 7, 2017 on India’s demonetization and issues related to managing your currency, wealth and taxes, with clear insights on potential gains or losses and tax penalties in India and the United States.

The seminar will feature a presentation by Ranvir “Biki” Mohindra, who has published a series of articles on the effects of demonetization and NRI tax and wealth issues based on his expert knowledge and experience in managing NRI tax and wealth portfolios.

In addition, a panel of experts will relate their personal experiences with demonetization and discuss related financial issues of interest of Non-Resident Indians and Overseas Citizens of India.

Topics discussed at the free seminar will include:

  • Understanding the twin financial revolution in India
  • Successes and failures of Demonetization
  • Who are the victims of Demonetization?
  • Why are FBAR and FATCA important to your financial health?
  • Retiring in India—A shattered dream due to changes in tax laws

Seminar Location: India House, 8888 West Bellfort, Houston, TX 77031

Date: Tuesday March 7, 2017, 7 pm to 9 pm

Networking: 6:30 pm to 7 pm. Light refreshments will be served.

To register for the free seminar: Please contact Mani Subramanian (kohur@aol.com), Vishnu Muralidharan (askvishnu@gmail.com) or Pramod Kulkarni (pramodhk2000@gmail.com)


MSN: How demonetization can change your home-buying decision

I thought you would be interested in this story I found on MSN: How demonetization can change your home-buying decision (http://a.msn.com/00/en-in/BBxr5BX?ocid=se)

India’s real estate market has seen a lot of churning of black money in the past. Even economists have been guarded in their opinions while trying to gauge the impact of demonetization on stemming black money.
By: Sanjeev Sinha | New Delhi


What are successes and failures of Demonetization?



There are many people who are giving strong opinions about the success or failure of the recent Demonetization in India. The Government will have you believe one way and the Opposition parties in the opposite way. To answer this complex issue question in a more practical and less political way, I think it is prudent to examine the question itself.

The purpose of Demonetization was multi-fold. So, it is very possible that some of these objectives were achieved more fully while there was partial success in other. I am going to examine each question in order of priority.

Q1. Is black money coming out of hiding?

Most certainly it is, as more money is being deposited than expected. Of the 15.4 lac crores. of the Rs.500 and Rs.1000 denomination bills, it was expected that about 80-85% would come back and the balance would be a credit to the treasury. Now, it appears that above 90% may come back by December 31, and this number could be higher by the final date of the new amnesty program, which is due to expire on March 31, 2017.


Q2. Is Demonetization a good thing or a bad thing?

It is both, but the positives outweigh the negatives. Higher the amount of black money that comes back, smaller the credit to the treasury. That is a loss, but at least the money is back in circulation. This is expected to lower the interest rates.

Q3. Was the demonetization well executed ?

The execution could have been better, but it was difficult to balance the need of secrecy and the planning for the implementation without bringing too many people into confidence. The long lines, shortage of cash and the tragedies of people dying waiting in line are regrettable.

Q4. What are the real, long-term benefits of Demonetization?

It is a fresh start,sort of like wiping the slate clean. Now, the people have a chance to decide their future. They can go back to the old ways of not paying taxes and hiding money, or living in a fair society where everybody pays their fair share of taxes. This will allow more resources in the hands of the Government to build a stronger country. Whichever party is in power, the government will be able to do a better job of growing the economy.

Q5. Will the cashless economy work?

It will be difficult, because old habits are hard to break. Nevertheless, there are signs of employers directly depositing salaries into bank accounts and retailers and consumers switching to electronic payments. The PayTM scheme of electronic transactions is becoming popular.

Q6. What is the latest amnesty program?

People have until March 31, 2017 to deposit their cash and request the amnesty. They will have to pay 50% in tax. Of the balance 50%, half will be held in a no interest account for four years. The balance (25% of the total) will be available immediately.

Q7. Will there be any criminal penalties?

As long as the people come forward voluntarily, there will not be any criminal penalties. However there have been weekly changes in the plans, so this too may change.

Q8. How long will it take for things to become normal?

There will be many stages. First, there must be sufficient amount of cash in circulation. This is expected to happen in January or February of 2017.  This will ease the day-to-day burden of holding cash for small transactions. But the cash-less economy will take a longer time and will be hard to implement outside the urban areas.

Q9. For NRIs, will U.S.-origin ATM cards work in India.?

Your credit cards will work, but there is a high transaction fee. The transactions also take an extended time for approval. A local card is a necessity. It takes your bank almost two weeks to issue the cards, so apply as soon as you can.

Q10. Was all the grief of Demonetization justified?

We will never fully know, but it was a very brave move and I support the Government in its efforts to usher India into the new, white and electronic era. The burden on the poor man is great. Lives were lost. Such hardships are difficult to justify. I hope they will put some serious efforts into teaching people how to live in the emerging financial system.

Q11. Have real estate prices dropped. Is this a good time to buy or sell?

The prices have dropped significantly. There are many sellers and few buyers. The market is not stable. People expect a direction in the market in about 3-6 months. However, there is as much of a chance that property values may decline further before they rise. We can give you a better assessment of the financial environment after March 31,2017, when the new amnesty is over.

If you are planning a trip to India, please make sure you have sufficient small bills to pay for a taxi to get to your home or hotel. We standby to answer any questions. Please call me at 713-805-0915 with any questions.


A resident of Texas for over 40 years, Ranvir Mohindra has been involved with many issues that are relevant to the South Asian community living in the United States. Whether you have money in India that you did not report or have inherited an ancestral property, there are new rules of compliance. Mr. Mohindra’s expertise is built on personal experiences and access to tax and legal professionals, both in Houston and in India, who can provide additional support to bring you in compliance and protect your assets. He can be reached at 713-805-0915 or nritax.wealth@gmail.com