Whatever may be consequences of the demonetisation of high-value currency notes on the Indian economy and people in general, the demonetisation drive led to significant changes in the savings habits of people and formalization of the assets market. “Considerably more funds came into the organized financial markets, whereas earlier households were parking much of their savings in unproductive physical assets,” says the RBI report on demonetisation.
According to the report, savings in the form of investment in equity mutual funds, life insurance premia etc increased. The total assets under management (AUM) of mutual funds (MFs) rose by 54% by the end of June 2017 from March 2016. As on 16 August 2017, the number of Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts stands at 29.52 crore with rural accounts comprising 60% of it. Thanks to demonetisation-led efforts, zero balance accounts under PMJDY declined from 76.81% in September 2014 to 21.41% in August 2017.
As part of fillip to digitalization, about 52.4 crore unique Aadhaar numbers have been linked to 73.62 crore accounts in India. As a result, every month now, about 7 crore successful payments are made by the poor using their Aadhaar identification. The government now makes direct transfer of Rs 74,000 crore to the financial accounts of 35 crore beneficiaries annually, at more than Rs. 6,000 crore per month. Now with the BHIM App and the Unified Payments Interface (UPI), a secure and seamless digital payments infrastructure has been created so that all Indians, especially the poor, can become part of the digital mainstream.
Digital payments have increased by 56% from 71.27 crore transactions in October 2016 to 111.45 crore transaction till the end of May, 2017. Within reach of the country is what might be called the 1 billion-1 billion-1 billion vision i.e. 1 billion unique Aadhaar numbers linked to 1 billion bank accounts and 1 billion mobile phones. Once that happens, all of India will become part of financial and digital mainstream.