Recalibration of ATMs will take up to three weeks, says Jaitley

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RBI and banks have stacked up enough currency to replace the Rs. 14 lakh crore worth of Rs.1000/500 notes, the Finance Minister said.

Union Finance Minister Arun Jaitley on Saturday regretted hardships caused due to withdrawal of high denomination notes but advised the public to be patient as the move will have larger benefits for the economy in long term.

He said it may take up to 3 weeks for all the 2 lakh ATMs to operate normally as each one has to be calibrated individually to dispense the Rs. 2000 and the Rs. 500 notes besides the Rs. 100 notes.

Assuring that the RBI and banks have stacked up enough currency to replace the Rs. 14 lakh crore worth of Rs.1000/500 notes that have been declared invalid, he said the government is constantly monitoring the situation as it is a “massive operation“.

As banks have been asked to remain open this weekend to cope with the rush, the Finance Ministry held a video-conference call with top RBI officials to assess the emerging situation and coordinate currency distribution across the country.

At a hurriedly called press conference, Mr. Jaitley urged people not to flock the banks to exchange the now-defunct banknotes, asking them to stagger it over the 50-day window provided by the government for the purpose.

The briefing, second in three days, was called after anger and chaos over never-ending queues were witnessed at banks that struggled to exchange old notes and give out newer Rs 2000 notes and smaller denomination currency.

Hardly 40 per cent of the ATMs were operating in the country and they too ran out of cash within hours. The new Rs. 500 note was available only in Delhi and Mumbai and RBI has already started releasing soiled Rs 100 notes to cope with the demand.

“ATMs could not have been calibrated (before the announcement) because of secrecy issue. Thousands of people are involved in recalibration exercise (and) secrecy could not have been maintained. Recalibration takes at least 2-3 weeks,” he said.

Terming demonetisation as a massive operation, he said there will be inconvenience in the first few days “but the long term advantages of this are to the overall economy“.

“It is a regret that people are being inconvenienced. Because a replacement of this magnitude will cause inconvenience as you have to go to the bank, you have to stand in a queue,” he said.

In the short run, he said, some “obvious” disruption will be caused in the short term.

“But once the money is available both in the system and more so in the banking system, the advantages of that to the economy and businesses will be far more. The capacity of the banks with all this additional capital to lend and support businesses is going to be far higher.

“And therefore medium term and long term advantages to the economy as against this temporary inconvenience or disruption, are far too many,” he said.

Highlights of the press conference:

3.55 p.m.: ''RBI exploring if more smaller currencies need to be circulated to meet the requirement.

3.52 p.m.: Depending on the rush, government will decide if banks have to operate on weekends as well.

3.49 p.m.: There are some recommendations pending with the government on concessions to encourage cashless transactions.

3.47 p.m.: Government advises people to deposit money in their accounts and withdraw.

3.46 p.m.: In some States, banks will be open on Mondays.

3.45 p.m.: Government has definite information on terror funding and procurement of weapons.

3.44 p.m.: Cheque is more safe mode of payment.

3.43 p.m.: Government will ask Banking Affairs Secretary for instructions to banks on helping senior citizens in smooth exchange of notes.

3.41 p.m.: More security features in new notes; would be difficult to counterfeit them.

3.38 p.m.: Large wholesalers need not just rely on cash transactions. The experience in the last two-and-a-half days is that any exception would lead to misuse. No concessions to any section in currency exchange.

3.37 p.m.: Today the energy is concentrated on smooth and quick replacement of money. Enforcement Directorate and other departments concerned are keeping a close watch on any illegal activities.

3.36 p.m.: Big regret is that people are getting inconvenienced, but currency replacement of this magnitude will cause problems. There are long but orderly queues.There are reports that money has been deposited in Jan Dhan accounts. This will be checked.

3.33 p.m.: Those in businesses should start using digital payment gateways, cards and banking system. Life will become simpler in the new financial system that is only viable option.

3.31 p.m.: Currency chest has sufficient cash, which is being transported to banks and post offices.

3.30 p.m.: People spreading rumours, like the one related to salt price. A close watch being kept on reports of bullion being used to convert cash.

3.29 p.m.: Some have alleged that bank deposits increased from July to September, alluding that the information on currency exchange was leaked. However, as per RBI records, In the last one year, there was a spike in deposits in in September only. It was due to disbursal of pay commission arrears.

3.26 p.m.: Among political reactions, there were irresponsible ones too. Some people have problems from the efforts to cleanse the system. Some are asking for one more week.

3.25 p.m.: Since new notes are of diffirent sizes, it is taking time to recaliberate the ATMs. That is why mostly Rs.100 notes are being dispensed from ATMS right now. Recalibration will take some time.

3.23 p.m.: Technology limitations are there, since secrecy was important. Two lakh ATM machines could not be calibrated for dispensing new notes.

3.22 p.m.: There are challenges in execution; people are turning up in large numbers and they will keep coming in the next few days. The government requests them that the deposit time is till December 30.

3.21 p.m.: Currency replacement of such magnitude takes time.

3.20 p.m.: A sum of Rs 47,868 crore deposited in the SBI; total deposits estimated five times more. SBI exchanged notes of 58 lakh people. Twenty-two lakh people operated at ATMs, 33 lakh have withdrawn.

3.18 p.m.: The SBI, which handles 20-25 per cent of total banking, has till 12.15 p.m. today conducted 2.28 crore transactions. Five transactions involved in banks:, cash deposit, withdrawal from cash, cash to cash exchange, ATM cah withdrawal and cah deposit machines being used. This apart from post offices.

3.16 p.m.: Twenty to 25% of banking in India is by the SBI.

3.15 p.m.: When govt decided to replace Rs. 500 and Rs. 1000 notes, there were expectations that in couple of days, people would queue up to replace a significant part, 86 per cent. It is a massive operation.

3.14 p.m.: Finance Ministry monitoring currency replacement constantly.

3.13 p.m.: Banking personnel should be lauded for their tireless work. "Government thanks primarily two sections. There is huge rush for currency replacement. But, people are cooperating despite problems. Bank employees also working day and night to execute the work properly."

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Government looking into sudden spurt in Jan Dhan account deposits

To give comfort to honest taxpayers, it has said deposits of up to Rs 2.5 lakh in accounts of housewives and farmers will not be reported to Income Tax authorities.

Government is looking into sudden ‘propping up’ of money into zero-balance Jan Dhan accounts, after an unprecedented Rs 2 lakh crore of cash flooded the banking system within just two days of demonetisation of high value currency. Finance Minister Arun Jaitley said law enforcement agencies are keeping a hawk eye on illegal currency changers, offering to change the junked 500 and 1000 rupee notes, as well as those investing their money in gold and bullion to hide unaccounted wealth.

“We are getting some complaints that suddenly monies have propped up in the Jan Dhan accounts, so there is a misuse and that is why the rationing in initial days takes place,” he said, adding that the departments concerned will act if anything improper is found in the deposits.

The government is focusing on ensuring that replacement of currency notes withdrawn, with new legal tender, takes place smoothly and quickly so that inconvenience to people is minimised, Jaitley said, adding “the Enforcement Directorate and revenue department are keeping a close watch”.

Cautioning those indulging in illegal usage of the demonetised currency, he said authorities will not hesitate to take action against any unlawful activity. His statement comes amid reports that the old high denomination notes had been used to buy gold or were being exchanged for a premium.

ED is scrutinising as many as 67 foreign exchange dealers and Directorate General of Central Excise Intelligence is also monitoring prominent jeweller and bullion traders.

The Finance Minister said India as a country should move towards plastics currency and more and more use electronic modes for transactions. Country’s largest lender State Bank of India has got Rs 47,868 crore cash deposits during the last two-and-a-half days and since SBI accounts for about 25 per cent of the banking system, the total cash mobilised by all banks put together could be around Rs 2 lakh crore, said.

In a surprise move, Prime Minister Narendra Modi had on the night of November 8 announced withdrawal of 500 and 1000 rupee notes but allowed people to deposit them in their bank accounts or exchange them with new Rs 2000 and Rs 500 notes till December 30.

To give comfort to honest taxpayers, it has said deposits of up to Rs 2.5 lakh in accounts of housewives and farmers will not be reported to Income Tax authorities.

“The objective of the scheme was to get the idle cash into the banking system and if you multiply it (SBI’s deposits) by 4-5 times, about Rs 2 lakh crore has become part of the banking system,” Jaitley said.

He said the government had factored in that inconvenience may be caused in first few days but the long term advantages for the overall economy were far more, he said. Businesses, he said, should brace for transacting through digital mode, cheques and payment gateways so that their lives remain simple going forward.

“As far as fake currency is concerned, government agencies are keeping an eye on that,” he said.