MUMBAI: A couple of days ahead of the first anniversary of the Narendra Modi government’s decision to demonetise Rs 500 and Rs 1,000 currency notes, bankers on Monday said the step had been good for them as it resulted in higher deposits and pushed digitisation at a faster pace.
On November 8 last year, Prime Minister Modi had announced that legal tender status of Rs 500 and Rs 1,000 notes would be revoked as part of his government’s drive against black money, counterfeit notes and corruption.
“For the banking sector, I would consider it positive as lots of money has come into the formal banking system. Casa (current account, savings account) deposits have gone up by minimum 250-300 basis points which itself is a big positive,” SBI chairman Rajnish Kumar said.
Deposits, which came into the banking sector left banks with trillions of rupees in surplus funds, leading to an overall decline in money market rates.
ICICI Bank chief executive Chanda Kochhar said the note ban led to formalisation of financial savings and increased the flow of funds to mutual funds and insurance.
“Post-demonetisation, there was a faster shift towards digitisation. Going forward, the whole approach towards digitisation will continue,” Kochhar said.
Although some analysts and a section of people in the government had initially claimed that the move would lead to a windfall gain of at least 20 per cent of the Rs 15.87 trillion (Rs 15.87 lakh crore) of banknotes cancelled, the Reserve Bank in June said as much as 99.1 per cent of the junked bills had returned to the banking system.
This led to widespread criticism of the move and the opposition parties are organising protests on the first anniversary of the demonetisation drive as “black day”.
Formalisation of financial savings will increase the ability of banks and other players to reach out to small customers, Kochhar said.
Kumar said that post-note ban and the roll out of the Goods and Services Tax (GST), some sectors have seen improvement but there are certain segments which need to see more action.
In last one year there has been a tremendous improvement as far as the steel sector is concerned, he said.