After Paytm, Now We Have Tez

Everyone seems to be capitalising on the after effect of the gaffe made by the Indian government last year. If it isn’t clear, the gaffe in question is demonetisation, where the Indian government banned the 1000 and 500 rupee notes, forcing a large chunk of the country’s population to steer away towards digital payments. As a result of this preference for digitised payments, Paytm, the most popular online payments app soared to new heights of popularity and recorded massive profits which allowed its owner to buy an expensive house, while the rest of the profits went to Alibaba, the Chinese company that owns the larger part of Paytm.

Looking to enter this profitable playing field and make a cut of the massive profits themselves, Google has launched their own payment app in India, named Tez (Hindi for fast). Tez, a United Payments Interface (UPI)-based digital app, goes a step beyond Android Pay, by allowing users to link payment apps from Indian banks. Tez also allows bank-to-bank payments and is comfortably protected by Tez Shield, Google’s own data security platform with the ability to detect fraud and protect user identity. Conveniently, Tez has a contact list that will give transaction history organised, somewhat like a chat app. According to Google, the app also allows small businesses to accept payments directly into their bank accounts.

“Send money home to your family, split a dinner bill with friends, or pay the neighbourhood chaiwala. Make all payments big or small, directly from your bank account with Tez, Google’s new digital payment app for India,” is Google’s official statement regarding their newest venture on its information portal.

But what makes Tez special, particularly in India, is that it uses Audio QR. This basically means that the app does not use user payment information but instead transfers money based on sounds. Twi devices can pair using these ultrasonic sounds, eliminating the need for payee and payer personal information. This will also make the process more rapid and frictionless and also bypasses the need for an NFC chip, since phones with NFC are still relatively rare and expensive.

The app will be available on both Android and iOS and Google is planning to release it in other emerging countries.

Sources: The Verge, TechCrunch 

RBI Annual Report FY 2016-17 – An Overview

Reserve Bank of India in its annual report stated that fiscal consolidation may come under threat both at the central and state level due to the immediate effects of the goods and service tax (GST), loan waivers and pay revisions, putting pressure on the overall growth matrix.

 

 

According to the report, public administration, defense, and other services mainly stifled the growth number. PADO added 2.2% points to the growth of real GVA in the services sector and 1.4 % points to the growth of overall GVA of 6.6% during the year.

In terms of production, agriculture and other allied activities recovered sharply in 2016-17. This was mainly facilitated by adequate monsoons as well as a considerable amount of increase in pulses’ minimum support prices (MSPs) that augmented the sector’s growth.

RBI said that there were uncertainties in regard to revenue mobilization, subsequent to the implementation of the goods and services tax along with increasing committed liabilities of states could led to a possible breach of fiscal deficit targets.

“In the fiscal sphere, while the gains in growth, efficiency and tax buoyancy over the medium term from the recent implementation of GST are unequivocally recognised, near-term uncertainties with regard to revenue mobilization therefrom – which could impact fiscal consolidation at both centre and state levels – cannot be ruled out as this fundamental reform gains pan-India traction,” RBI said in its annual report

The State finances have also deteriorated on account of the UDAY (Ujwal Discom Assurance Yojana) scheme aimed at reviving poor power distribution companies (discoms) and revenue falling short despite cutbacks in capital expenses. Additionally, four state governments – Uttar Pradesh, Maharashtra, Punjab, and Karnataka — are likely to face challenges as the farm loan waiver could derail the fiscal discipline.

 

Infrastructure saw many firsts

Stalled projects declined by 40% in terms of value and 37% in terms of number, according to the RBI’s annual report.
The financial year saw the highest ever awarding and construction of national highways. Also, capacity addition in all the major ports was also the highest during this year. India for the first time turned from a net importer to a net exporter of electricity.

 

Aggregate Demand Suffered

During the financial year 2016-17, GDP weakened due to the slowdown in Gross capital formation (Net increase in physical assets in the financial year) as a result of sluggish business confidence and lowering in the entrepreneurial spirit took a toll on the new investment.Gross fixed capital formation contributed barely 0.7 percentage points to the real GDP growth of 7.1% in FY17, despite accounting for around one-third of real GDP.
RBI’s assessment reflects the real GDP growth was largely sustained by private and public spending. In fact, in the absence of factors like the 7th Central Pay Commission hikes and the one-rank-one-pension for defense services, real GDP growth would have been lower by 2 percentage points, the regulator noted.

The RBI said Private consumption spending alone contributed two-thirds of the growth in aggregate demand.

On Demonetisation

The RBI reported that 632.6 crore notes of Rs 1,000 denomination in circulation, 8.9 crores have not been returned post the note ban on 8th November 2016. Thus, only 1.3% of Rs 1000 notes didn’t return after the demonetization exercise. The printing cost of new notes doubled to Rs 7,965 cr in the financial year 2017 from Rs 3,421 cr in the financial year 2016 on account of new currency printing post note ban.

Source – RBI Annual Report

http://www.moneycontrol.com/news/business/economy/only-1-3-of-rs-1000-notes-didnt-return-after-demonetisation-rbi-report-2373311.html

Economic Times- http://economictimes.indiatimes.com/news/economy/finance/fiscal-consolidation-may-be-derailed-due-to-gst-loan-waivers-and-pay-revisions/articleshow/60294821.cms

Image source- Financial Express

RBI stops printing Rs 2000 notes and focuses on new Rs 200 notes

According to Livemint, the Reserve Bank of India (RBI) has stopped printing Rs 2000 notes for the current fiscal year. The notes were introduced post the demonetisation drive on November 8, 2016; in a bid to quickly increase currency in circulation. The RBI has not printed Rs 2000 notes for the past five months from its Mysuru mint; instead is expected to release new Rs 200 notes by next month.

RBI data reveals, eight months post demonetisation, the currency in circulation was only 86% at Rs 15.55 trillion as on July 14 in comparison to Rs 17.7 trillion on November 4, 2016. In majority, so far, nearly 14 billion pieces of new Rs 500 notes have been printed (close to 90% of the current currency circulation).  However, sounding cautious the SBI chief economist Soumya Kanti Ghosh said, “RBI is possibly keeping the supply of Rs 2000 bank notes low to get a right mix.”

Further, a report dated July 19, 2017 by SBI’s economic research wing shows banks with 5.4 per cent of currency in circulation, versus 3.8 per cent before demonetisation. This means that most ATMs or bank branches have excess cash lying with them, which can probably be Rs 2000 bank notes. The report also highlighted the mismatch in distribution of currency towards smaller denomination as the presence of Rs 2000 denomination straight after Rs 500. The introduction of Rs 200 notes aims to address this gap.

Sources: Livemint, Business Standard

Government extends deadline for banks to deposit old notes at RBI

The government announced on Wednesday, June 21, that it has opened a second window for banks, post offices and cooperative banks to deposit old notes with the RBI. The earlier window – till December 31, 2016 – has been extended to July 20, reported PTI.

A recent notification from the Department of Economic Affairs said,” Such specified bank notes may be deposited by such Bank, Post Office or District Central Cooperative Bank, as the case may be, in any office of the Reserve Bank, within a period of 30 days from the commencement of these rules.”

Prime Minister Narendra Modi had demonetised Rs 500 and Rs 1000 notes from November 8, 2016 to curb corruption and eliminate the circulation of fake Indian currency notes. The government had permitted commercial banks and post offices to accept the old notes from the public till December 30. District central cooperative banks were allowed to accept them till November 14.

According to Business Line, the finance ministry has allowed RBI to accept any banned notes from banks and post offices till July 20, only if they were collected by December 30, 2016.  The same extension was available to cooperative banks provided they collected the junked notes by November 14.

However, banks and post offices will have to cite reasons for non-deposit of the specified bank notes within the time period “subject to the satisfaction of the RBI”.

As of November 8, 2016, a total of Rs 17.7 lakh crore was in circulation, which included the banned notes of Rs 500 and Rs 1000.

The last official count released by RBI on December 13 revealed that banks had collected Rs 12.44 lakh crore in old currency notes till December 10.

Sources: PTI, The Hindu Business Line

State-owned banks nationwide strike hits banking operations

State-owned bank employees went on strike today, halting the banking operations. The day-long strike was called by nine bank unions comprising of officers, bank officials as well as clerks. The demands behind the strike are related to wages. According to All India Bank Employees Association (AIBEA) General Secretary CH Venkatachalam, around 10 lakh bankers joined the strike today.

The other demands included compensation for extra work put in by the bank workers during the initial process of demonetisation, criminal actions against wilful defaulters, recruitment in all banking positions. The union also protested against government proposed labour reforms and outsourcing of permanent jobs.

Top private lenders like ICICI Bank, HDFC Bank and Axis Bank however will continue to function normally but cheque clearing operations could be hit.

The employees of the IT departments of some of the participating state-owned banks were exempted from the strike. The online operations ran smoothly.

A conciliation meeting was held with the bank management association on February 21st which failed to come with any positive result and hence the strike was called.

SOURCE-

  1. NDTV PROFIT-http://profit.ndtv.com/news/banking-finance/article-bank-strike-today-cash-cheque-transactions-to-be-hit-1664316

2. INDIA TODAY-http://indiatoday.intoday.in/story/bank-strike-cheque-cash-transactions-latest-updates/1/893072.html

3. HINDUSTAN TIMES

Weekly cash withdrawal increases to Rs 50000

After 105 days of demonetisation, the Reserve Bank of India relieved the citizens as the weekly cash withdrawal limit was increased to Rs 50,000 from the savings account.

The announcement was made by RBI Deputy Governor R. Gandhi along with Governor Urjit Patel on the sixth bi-monthly monetary policy review. Earlier RBI relaxed withdrawal restrictions from current account, cash credit account and ATMs but there was a cap of Rs 50,000 for farmers a week and Rs 2.5 lakh for marriage.

The upper limit to withdraw money from savings account has been shifting upwards. From Rs 2000 a day to Rs 4500, it rose to Rs 10000 per day with a weekly ceiling of Rs 24000 implemented on January 30 and on Monday, February 20, 2017 it reached Rs 50000 weekly.

RBI had imposed withdrawal limits on banks and ATMs to handle cash crunch following demonetisation of Rs 500 and 1000 notes. Since November 8, 2016 the Government came up with a number of notifications and limits to equivalently distribute the new notes to the public.

As the government is pumping in new currency, the limits are gradually being erased to keep the pace of remonetisation. The government also announced that all the caps on money withdrawal will be removed from March 13, 2017.

News Source: NDTV, Financial Express

Image Source: HT Photo

Post-demonetisation auto sales plummet to 16-year low

Apart from the informal labour sector, if one industry is hit hard it must be the automobile sector. According to the latest data published by the Society of Indian Automobile Manufactures (SIAM), the December sales in domestic market stood at 1,221,929 units, 18.66% lower than December 2015 while exports suffered negative sales of 3.12%.

Small commercial utility vehicle remains the only segment to register growth at snail paced 1.15% at 31,178 units. The two-wheeler segment saw its biggest dip with 22.04% to 9,10,235 units since SIAM started collecting data in 1997. Rural India contributes to half of two-wheeler sales, which have been hit hard resulting to a record dip.

Vishnu Mathur, director general, SIAM, told reporters, “This is the highest decline across all categories since December 2000 when there was a drop of 21.81 percent in sales. The reason is largely due to the negative consumer sentiment in the market due to demonetisation.”

Domestic car sales also tanked down by 8.14% to 1,58,617 as against 1,72,671 units recorded last year at the same time, while ales of commercial vehicles were down 5.06 per cent at 53,966 units in December 2016.

This December witnessed the largest discounts on domestic sales but still failed to inspire buyers. The budget to be presented remains the only hope which could bring back buyers if some incentives are announced as a good monsoon and 7th pay commission pay rise have failed to wield magic.

Sources: The Hindu, Economic Times