Risk to the demonetization scheme and solutions

Demonetization is an excellent and laudable step, but as said wisely, "Devil lies in the details". Somehow the bureaucrats responsible for executing the scheme, seems to have been clueless about some of the ground conditions, such as

1. Banks are free to open new account without any centralized verification of data
2. There are lot of fake Jan Dhan accounts, which were opened by banks, to meet their targets. 

These 2 factors have led to creation of multitude of fake accounts.

Example 1 - Bank Manager colludes with a business man and opens 200 accounts on the basis of fake documents with no verifiable details and fake address. Simply the business man will deposit money in those fake accounts

200*say 2 lacs each = 4 Cr deposited

Use withdrawal slips and withdraws 20k daily from each account. He will be able to convert his black into white in 10 working days

Example 2 - Bank Manager knew he has created 1000 fake Jan Dhan Accounts to meet his targets in the past. He looks around and colludes with his favorite customers to convert black into white


Consider this, there are 8 Cr JD accounts and most of them are with dubious details. Even with a highly optimistic estimate, at least 30% of them are either fake or non-verifiable. So, 2.4 Cr fake accounts. This is very dangerous for the scheme.

Solutions needed to be implemented with immediate effect

1. Banks should be barred from opening any new account without verifying address physically and without PAN card
2. JD accounts should be barred from any transaction beyond 10k per month. If someone wants more limit, let them have regular accounts or they would already have that, if they have more than 10k income. 
3. Set examples and create detterence by sending notices en-mass and do some arrests of bank managers also, so that the whole banking community, gets the message, loud and clear

Hack of using ATM in Indian Cash crisis

Use a variety of methods

1. Talk to gaurds of ATM, if they belong to a security company
2. cashnocash.com - useless most of the times

Biggest hack is use the night time, around 10 PM and then once you have drawn 2500 per card, again join the line. After 12 PM, you will one more chance. 

Was the scheme of demonetization leaked, 15 days beforeho

There have been lot of media news and clippings of news papers doing round that the whole plan was selectively leaked to a select few people and groups

Who is brijesh dubey ? where did he got information from?

Govt. need to answer these questions, so that the conspiracy theories going around can be stopped.  

Demonetization - Good/Bad and the future

First of all, this is not the first time, demonetization has been done. The major difference this time is that the currency value is very less. 1000 ruppee at time of Morarji Desai = 10 lacs now (perhaps)

Evaluation - Good Part

1. It was well kept secret. Indira failed in this test. She perhaps had a mole.
2. RBI was kept in sych
3. well shielded secret = NDTV was perhaps falsely created and Govt. never meant such extreme step, US election sheilded warth of international media
4. Weekday choosen - Weekend shopping not disturbed, enough time and resource at hand at bank
5. Illegal and fake currency game will be halted for a short while. 

Evaluation - Not so good part

1. Jewelry shops were not closed for say 3-5 days
2. Too much of time has been given - 3 months (Come on, don't think people are that stupid that they will not be able to convert black to white in 3 months)
3. Loop holes in terms of corrupt bank officials esp. private banks. Here small time managers, are doing lot of money minting by opening fake accounts or dubious accounts without PAN or invalid PAN. 

What can be done right now?

1. Announce to deposit notes within 15 days, say by 20th of November. Left out people can still deposit after 15 days, but with greater scrutiny.
2. People should not be allowed to deposit more than 1.5 times of last year income as per ITR. If someone still wants to do, a special process should be followed
3. Close jewelry shops for 5 days
4. Banks should be asked not to open any new accounts in next 15 days, without special requirements approved by say zonal managers etc. 

Overall Evaluation 

It is really a good scheme and pending for long time. Baba Ramdev negotiated for this masterstroke in 2011, with Congress. But the scheme was not designed well. Though there are enough knowledgeable people in the Govt. and it is easy to think in the hindsight than in foresight, Govt.and RBI need to become more agile and adaptable and keep on changing tracks, so that all the loopholes are plugged.

Future

Common people will embrace digital currency. Small entrepreneurs will find it comfortable to deal with digital currency. Bureaucrats and Politicians will forced to find new and legal ways to park money. Big businessman will have business as usual and will have minor tinkering in just their business models.

One major impact could be cleaning of black money in daily life. It will continue like that only in elections. CA's will get higher demand for innovating accounting books.

Yes, one more interesting impact, ISI has to burn their existing inventory of INR and print new lots. They will also look for more innovating ways in future.