The Narendra Modi government’s move to demonetise previous series of Rs 500 and Rs 1000 banknotes could lead to softening of interest rates by banks, thereby lowering your loan EMIs in the future.The huge deposits that are likely to flow into the banking system after customers deposit their old currencies that are no longer legal tender would enable banks to lower interest rates, according to Amit Jindal, Partner, Felix Advisory.
“After deposit of cash into banks, the money circulation in banks will improve. With the increase in cash reserves, interest rate on loans, as well as deposit, might go down,” Jindal said.He points out that the Income Declaration Scheme, 2016, the government had received Rs 29,362 crores of tax by disclosure of undisclosed income Rs 65,250 crores. “Under the current move, disclosure and deposit of cash into the bank is expected to be of multiple times,” he said.
According to Jindal, other likely impact of the move to demonetise earlier Rs 500 and Rs 1000 notes is as follows:
*Cash transactions will gradually cease to exist in the economy for the near future
*Property prices will come down
*Small income saving people would also be forced to come under banking channel, which was actually the spirit of Govt. under ‘Jan Dhan Yojana’
*All the retail trader would be forced to take some sort of registration
*Tax collection would rise as most transactions would come under radar of tax authorities
*GDP growth will increase due to increase in circulation of cash money through banking channel
*The move will help reduce the overall corruption in the system.