Prime Minister Narendra Modi on Sunday warned of tough action under the benami law against unscrupulous elements using the Jan Dhan accounts of the poor to park black money and hailed people’s “sacrifices” despite efforts to mislead them against demonetisation. The Prime Minister, however, admitted that the dream of a “cashless society” can’t be achieved immediately. “(However,) once we start the move towards a less-cash society, the goal of a cashless society will not be far away,” he said in his monthly radio programme ‘Mann ki Baat’.
Separately, in an interview to PTI, Reserve Bank Of India (RBI) governor Urujit Patel said the central bank, along with the government, is monitoring the situation on a daily basis to “ease the genuine pain of the citizens” following the demonetisation move on November 8. While RBI had on Saturday announced an incremental cash reserve ratio of 100% because of the surge in deposits with banks after demoentisation, Patel said the decision would be reviewed immediately once the government issues adequate quantum of MSS (Market Stablisation Scheme) bonds, as promised.
“The RBI is interacting with the banks every day. They are telling us that the situation is gradually easing. The queues in branches and ATMs are shorter and the markets are starting to function, and there are no reported shortages of daily items of consumption,” Patel said.
“People have asked why the new currency notes introduced were different in size and thickness from the old. This is because the new currency has been designed to make it hard to counterfeit. When you are going to make a change of this magnitude, you need to get the best standards in place,” Patel said.
Around 50,000 people have been deployed to refit the ATMs and the banks are working in a mission mode to lift the new currency notes and deliver them to their branches and ATMs, Patel said. “There are no precedents on this subject at this scale and we have to be reactive to the situation,” he added.
Modi, via Mann ki Baat programme, urged citizens to shift to a cashless system of transactions–an appeal that was also echoed by the RBI governor. Currently, India’s cash-to-GDP ratio is as high as 12%, roughly three times of even developing countries like Brazil and South Africa, as most transactions in the informal sector of the economy are settled in cash. Reports suggest that the RBI and commercial banks spend around Rs 21,000 crore in currency operations costs a year. According to a study commisioned by MasterCard, which was released early last year, the share of the electronic mode of transactions in the overall payment system have risen to 6.8% from 2.6% in 2007, but still remained far below potential.
On the mis-use of Jan Dhan accounts, Modi said even now, “some people think they can bring their black money”. “Unfortunately, they are misusing the poor for this purpose by misleading, luring or tempting them to put (such black) money into their accounts.” “I would tell such (unscrupulous) people that…please don’t play with the life of the poor,” Modi said.
Jan Dhan accounts, which accumulated just Rs 45,637 crore in over two years through November 8, witnessed additional deposits of a massive Rs 27,200 crore in just two weeks after demonetisation. This raised suspicion that many people may be using such accounts of the poor to park illegal money. The Prime Minister’s warning of using the benami law came amid fears that although 23% of the 25.68 crore Jan Dhan accounts still have zero balance, even those can be tapped by such unscrupulous elements in the weeks to come.
The Benami Transactions (Prohibition) Amendment Act, 2016, which came into effect on November 1, stipulates provisions of rigorous jail term of up to seven years plus fine (which may extend to 25% of the fair market value of a benami property), replacing the earlier law of a three-year jail term, or fine, or both. Assets of any kind—movable, immovable, tangible, intangible, any right or interest, or legal documents can qualify to be benami. A person could also face rigorous imprisonment for up to five years for knowingly giving false information and will have to pay a fine of up to 10% of the market value of the property.
In an apparent hint at the Opposition, Modi said attempts were being made to mislead the people against demonetisation, even though they were making sacrifices for a better India. In a rally in Uttar Pradesh, Modi said: “On one hand we are trying to put a check over corruption with ‘Bhrashtachar Bandh’ while on the other hand some political parties are organising ‘Bharat Bandh’. Should there be ‘Bharat Bandh’ or ‘Bhrashtachar Bandh’?”.
Meanwhile, pitching for less cash use, RBI’s Patel called for more use of cash substitutes like debit cards and digital wallets, saying it will make transactions cheaper and easier and in the long term, will help India “leapfrog into a less cash-use economy on a par with more developed nations.”
He said banks are being asked to make a big push with Point of Sale machines with traders to improve the use of debit cards.Patel said that the RBI has announced an incremental cash reserve ratio of 100% “because of the large increase in deposits of banks” following demonetisation and the decision would be reviewed immediately once the government issues adequate quantum of MSS (Market Stablisation Scheme) bonds, as promised.