Mumbai:

The Reserve Bank of India (RBI) on Monday said 97.96 per cent of the Rs 2000 denomination banknotes have returned to the banking system, and only Rs 7,261 crore worth of the withdrawn notes are still with the public.

On May 19, 2023, the RBI announced the withdrawal of Rs 2000 denomination banknotes from circulation.

The total value of Rs 2000 banknotes in circulation, which was Rs 3.56 lakh crore at the close of business on May 19, 2023, when the withdrawal of Rs 2000 banknotes was announced, has declined to Rs 7,261 crore at the close of business on August 30, 2024, the RBI said.

“Thus, 97.96 per cent of the Rs 2000 banknotes in circulation as on May 19, 2023, has since been returned,” it said in a statement.

The facility for deposit and/or exchange of the Rs 2000 banknotes was available at all bank branches in the country till October 7, 2023.

The facility for the exchange of the Rs 2000 banknotes has been available at the 19 issue offices of the Reserve Bank since May 19, 2023.

From October 9, 2023, RBI issue offices are also accepting Rs 2000 banknotes from individuals and entities for deposit into their bank accounts.

Further, members of the public are sending Rs 2000 banknotes through India Post from any post office within the country to any of the RBI issue offices for credit to their bank accounts.

The 19 RBI offices depositing/exchanging the banknotes are in Ahmedabad, Bengaluru, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram.

The Rs 2000 banknotes were introduced in November 2016, following the demonetisation of the then-prevailing Rs 1000 and Rs 500 banknotes. 

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Mumbai:

Prime Minister Narendra Modi on Friday said the government is taking various measures at the policy level to promote the fintech sector, which attracted over USD 31 billion in investments in the last 10 years, and the abolition of the Angel Tax is also a step towards the growth of the segment.

Addressing the Global Fintech Fest 2024 here, the Prime Minister also asked the regulators to take more measures to stop cyber fraud and further increase digital literacy among people.

“Fintech has played a significant role in democratising financial services,” he said, and expressed confidence that it will help in improving the quality of life for Indians.

PM Modi emphasised that the adoption of fintech by Indians is “unmatched in speed and scale” and no such example can be found anywhere else in the world.

He said the transformation brought about by the fintech sector in India is not just limited to technology, but its social impact is far-reaching.

He also stressed that fintech has dented the parallel economy and is bridging the gap between villages and cities on the financial services front.

The Prime Minister also said that in the last 10 years, the fintech space has attracted investments of more than USD 31 billion and fintech startups have grown by 500 per cent.

He said it is festive season in India, and there is also festivity in the economy and markets, in an apparent reference to the robust GDP growth and capital market scaling new highs.

PM Modi also informed the gathering that loans worth over Rs 27 lakh crore have been disbursed under the Pradhan Mantri MUDRA Yojana, the world’s largest microfinance scheme.

Speaking at the event, RBI Governor Shaktikanta Das said, digital technologies have been instrumental in expanding financial inclusion, improving efficiency and enabling real-time services across the country.

“Today, India stands as a global leader in digital payments, a feat achieved by combining proactive policy-making with innovation and technological advancements. Collaboration between policymakers, regulators and innovators is the defining element of India’s Fintech journey,” Mr Das said.

The Reserve Bank’s regulatory frameworks have facilitated new and innovative businesses to grow in an orderly manner, he said.

“These regulatory initiatives reflect our commitment to support innovation with prudence. Our collaborative approach is visible in the fact that we have held a large number of interactions over the last one year with the Fintech sector players,” he said.

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The Reserve Bank of India (RBI) has constituted an Expert Committee under the chairmanship of deputy governor Michael Debabrata Patra to benchmark the statistics regularly disseminated by it against global standards/best practices; study the quality of other regular data, where such benchmarks do not exist (e.g., sectors of national priority); and provide guidance on the scope for any further data refinement.

The members of this committee include R. B. Barman, former chairman, National Statistical Commission member; Sonalde Desai, National Council of Applied Economic Research (NCAER), New Delhi, and University of Maryland, USA; Partha Ray, Director, National Institute of Bank Management, Pune; Bimal Roy, former chairman, National Statistical Commission; and former director, Indian Statistical Institute, Kolkata; Paul Schreyer, former chief statistician, Organisation for Economic Co-operation and Development (OECD); Sudarshan Sen, former executive director, RBI; Bruno Tissot, head of Statistics and Research Support, Bank for International Settlements (BIS); Muneesh Kapur, executive director, RBI and O.P. Mall, executive director, RBI.

“The Committee will submit its report by the end of November 2024,” the RBI said in a statement. 

What is inflation? 

In simple terms, inflation refers to an increase in the price of goods and services over a period of time. To illustrate, if five chocolates cost Rs 10 in 2020 and if the price went up to Rs 15 in 2024, it simply means that the cost of chocolates has increased over a period of four years. 

What causes inflation? 

Inflation can happen when the demand for products or services exceeds the supply. This is referred to as demand-pull inflation. Inflation can also arise when the manufacturing or production cost of goods increases, disrupting the supply chain or what is unavailable in the market. For example, India’s major importers of oil were Iraq and Kuwait. This is known as cost-push inflation. When Iraq invaded Kuwait in 1990, it led to a situation of oil crisis in India as the country relies on crude oil to meet its demand. Sometimes, in the event of natural calamities such as earthquake, tsunami or floods, or geopolitical tension like Israel and Palestine war, the supply of the goods that the consumer wants can be disrupted.  

Who monitors inflation? 

The Reserve Bank of India (RBI), the central agency, monitors the inflation rate in India. Usually, when the inflation rate increases, the central bank increases the key lending rate on loans and deposits, discouraging consumers as well as businesses from taking out a loan. When inflation is down, the RBI cuts down the interest rates. This encourages consumers to take loans.  

For fixing the interest rates to tackle inflation, the RBI constituted a six-member monitory policy committee (MPC) headed by Governor Shaktikanta Das. MPC was established on June 27, 2016. Once every six months, the central bank publishes a document called Monetary Policy Report to explain the reasons behind inflation.  

How to calculate?

 The rate of inflation calculated by the National Statistical Office (NSO), under the Ministry of Statistics and Programme Implementation, is based on the consumer price index (CPI), a key economic indicator. It measures an economy’s inflation level by considering the basket of goods and services, such as food, transportation, clothing, health, that typical consumers purchase. Based on this economic measure, policymakers can make informed decisions about taxes and interest rates. 

How does it impact us?

 As most of the Indian population belong to the middle class, inflation can have a huge impact on them in several ways. Inflation does not lead to an increase in wages or salaries as they are fixed earnings. This decreases the purchasing power (ability to buy) of consumers, and they become more conscious of buying. For example, if inflation has touched 15% and the salary of an employee remains the same as it was at 10%, then he/she is earning 5% less. Rise in price of household items like sugar, wheat, gas, etc forces the consumer to spend more to maintain a good standard of living. All this can lead to stress and anxiety, taking a toll on the mental health of a consumer. 

New Delhi:

The Reserve Bank of India imposed a penalty of Rs 2.41 crore (nearly $288,000) on Visa in relation to its usage of an unauthorised payment transfer method, the central bank said on Friday.

“It was observed that the entity (Visa) had implemented a payment authentication solution without regulatory clearance from RBI,” the central bank said in a statement, without providing details on the transgression.

“We duly acknowledge the RBI order and remain committed to following RBI guidelines and regulations to continue providing safe and secure payment solutions in India,” a Visa spokesperson said in a statement.

In February, the RBI had ordered the credit card company to stop using an unauthorised route to make some commercial payments, per a Reuters report.

The central bank has aimed to tighten scrutiny of the processes followed by financial technology, or fintech, companies.

($1 = 83.6990 Indian rupees)

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The RBI indicated that the interest rates offered by the Union government on two of India’s most popular small savings schemes continue to languish below the rates they should have earned as per a formula-based system adopted since April 2016. File
| Photo Credit: Reuters

The interest rates offered by the Union government on two of India’s most popular small savings schemes — the Public Provident Fund and five-year recurring deposits — continue to languish below the rates they should have earned as per a formula-based system adopted since April 2016, the Reserve Bank of India (RBI) has indicated.

The PPF rate has been static at 7.1% since April 2020. The return on the five-year recurring deposit (RD), which had been frozen at 5.8% from April 2020 to March 2023, had been hiked gradually over the first three quarters of 2023-24, taking it to 6.7% by last October.

At the time, the RBI had reckoned that the returns on the PPF were 41 basis points (bps) lower than their formula-based rates, while the five-year RD rate was 21 bps lower, for the October to December 2023 quarter. One basis point equals 0.01%.

RBI formula

The formula for quarterly resets of small savings rates, mooted by a panel led by former RBI Deputy Governor Shyamala Gopinath, links them to secondary market yields on government securities of comparable maturities over a three-month period prior to each quarter.

The PPF rate was last hiked in October 2018, when it was pegged at 8% ahead of the 2019 Lok Sabha election. After that poll, the government had reduced the rate to 7.9% from July 2019, and slashed it further to 7.1% at the onset of 2020-21, when it cut rates on all small savings instruments in the range of 0.5 and 1.4 percentage points (or 50 to 140 bps).

Prior to the 2024 Lok Sabha election, the Union government announced a hike in rates on most small savings schemes for six successive quarters, culminating in the January to March 2024 quarter, when the returns on the Sukanya Samriddhi Account Scheme (SSAS) were raised from 8% to 8.2%, and the three-year time deposit from 7% to 7.1%. While there have been no changes effected in rates since, the PPF rate has been excluded from the ambit of all these hikes.

Tax-free scheme

“The Government of India kept rates on small savings schemes unchanged for Q2:2024-25 [July to September 2024]. Rates on various schemes are now aligned with the formula-based rates except for public provident funds and five-year recurring deposits,” the RBI noted, in its latest monetary policy report released as part of its monthly bulletin last week. Unlike last October, the RBI has not quantified the gap between the formula-based rate and the PPF and five-year RD rates.

The Finance Ministry has generally defended the stasis in PPF rates by emphasising that the returns on the scheme are tax-free so tax-adjusted returns are higher. But the same tax treatment is also offered on the SSAS, which was launched in 2015. The SSAS rate was frozen at 7.6% from April 2020 to March 2023, but was raised to 8% last April and 8.2% from this January.

As of the end of March 2024, NBFCs had a CRAR of 26.6%, a GNPA ratio of 4.0% and a return on assets (RoA) of 3.3%. (Representational image only)

Ahead of the upcoming Union Budget scheduled to be presented on July 23, the Non-Banking Financial Company (NBFC) sector is expecting enhanced financial inclusion and reinforcing digitalisation efforts to sustain the sector’s growth.

Finance Industry Development Council (FIDC), which represents the industry, has suggested establishing a special refinancing body, just as the government has created National Housing Bank (NHB) for housing finance companies.

On the other hand, the sector this year has seen stringent regulatory action from the Reserve Bank of India (RBI). Additionally, speaking at an event in May this year, RBI Deputy governor J. Swaminathan cautioned the NBFCs not to be overly reliant on algo-based credit models. However, the apex bank, in its 29th Financial Stability Report (FSR) said that the NBFCs are well capitalised, giving an edge to the financial sector in the country.

As of the end of March 2024, NBFCs had a CRAR of 26.6%, a GNPA ratio of 4.0% and a return on assets (RoA) of 3.3%.

“The growth of the Indian NBFC industry is significantly influenced by robust financial inclusion, consumer demand and improving trade balances. The upcoming Union Budget should emphasise enhancing financial inclusion across the country, implementing policy reforms, and reinforcing digitalisation efforts to sustain the sector’s growth.

Financial and digital inclusion will enhance credit access by increasing convenience and reducing turnaround times,” said Rakesh Kaul, CEO, Clix Capital.

“The government must consider incentivising and promoting such measures so that NBFCs can carefully take advantage of global integration, ensuring sustainable growth and financial inclusion across India’s diverse economic landscape,” said Jitendra Tanwar, Managing Director & CEO of Namdev Finvest Private Limited.

He further added that the government must consider incentivising and promoting such measures so that NBFCs can carefully take advantage of global integration, ensuring sustainable growth and financial inclusion across India’s diverse economic landscape.

Expressing his confidence in the Budget this year, Krishan Gopal, CFO, Aye Finance, said, “I believe this Budget will lay the groundwork for India’s vision of development by 2047. We expect the Government to recognise the efforts of NBFC lenders that are transforming micro-enterprise lending in India by providing customised credit lines, announcing schemes and subsidies and even considering classifying them as Priority Sector Lenders.”

“Despite strong competition from banks, non-banking financial companies (NBFCs) have shown remarkable resilience in retaining a significant market share. To drive further growth, we seek policies that promote responsible credit utilisation, enhance access to credit for underserved communities, and foster financial literacy among customers,” said Mathew Muthoottu, MD Muthoottu Mini Financiers Limited.

”NBFCs are expecting the Budget to carry provisions that spur consumption, such as via tax relief etc.; implement initiatives that enable growth of NBFCs serving priority sector clients; and undertake widespread campaigns aimed at inculcating good credit behaviour amongst the country’s growing borrower base,” opined Neha Juneja, Co-founder and CEO, IndiaP2P, on her Budget expectations.

Anticipating the allocation of additional funds for the sector, Pavitra Walvekar, the CEO of Kudos Finance, which is based out of Pune, said, “Key initiatives should include the allocation of additional funds to improve liquidity for NBFCs and the introduction of regulatory reforms to streamline operations and enhance transparency. These steps will bolster credit availability, particularly for underserved segments like MSMEs, and promote financial stability in the long run.”

Arvind Virmani, NITI Ayog member. File
| Photo Credit: Special arrangement

“The Indian economy will grow around 7% in the current fiscal year and is on track to maintain a similar growth rate for several years,” NITI Aayog member Arvind Virmani said on July 12.

Mr. Virmani said there are new challenges facing the country and they will have to be dealt with. “Indian economy will grow at 7% plus minus point 0.5%… I expect that we are on track to grow at 7% for several years from today,” he told PTI in an interview.

Last month, the Reserve Bank of India (RBI) pegged the FY25 gross domestic product (GDP)growth rate at 7.2%. Responding to a question on the decline in private consumption expenditures in the last fiscal year, Mr. Virmani said it is actually recovering now.

“The effect of the pandemic was to draw down savings… and very different from previous financial shocks,” he said. Explaining further, Mr. Virmani said it is like what he calls a double drought situation.

“We also had, of course, El Nino last year, but what the pandemic did was that it resulted in people having to draw down their savings… So, the obvious reaction is to rebuild your savings, which tend to reduce current consumption,” he noted.

“If people were buying branded goods, they will buy less branded or ordinary goods and save part of that money,” he said, explaining that this shows a slide in consumption.

Mr. Virmani said history shows that coalition partners can slow privatisation in States in which the regional ally is in power, but that is not a big issue.

“I see no reason why privatisation cannot happen in the other States and it may also happen in these States (where coalition parties are in power). I am just giving you a historical example,” he said.

With support from N. Chandrababu Naidu’s Telugu Desam Party (TDP) and Nitish Kumar-led JD(U), along with other alliance partners, the NDA crossed the halfway mark in the recently held Lok Sabha elections to form the government at the Centre.

On the decline in foreign direct investments (FDI) to India, despite it being the fastest growing economy, Mr. Virmani said riskless return of investment is much higher in the U.S. and other developed countries than in emerging markets.

“As soon as interest rates begin to come down in the U.S., I expect the FDI into emerging markets, including India, to increase,” he said.

The Reserve Bank of India. File
| Photo Credit: Reuters

The Reserve Bank’s FI-Index, capturing the extent of financial inclusion across the country, rose to 64.2 in March 2024, showing growth across all parameters. The index captures information on various aspects of financial inclusion in a single value ranging between 0 and 100, where 0 represents complete financial exclusion and 100 indicates full financial inclusion.

“The value of the index for March 2024 stands at 64.2 vis-à-vis 60.1 in March 2023, with growth witnessed across all sub-indices,” the Reserve Bank of India (RBI) said in a statement on July 9. The improvement in FI-Index is mainly contributed by usage dimension, reflecting deepening of financial inclusion, it added.

The FI-Index comprises three broad parameters — access (35%), usage (45%), and quality (20%) — with each of these consisting of various dimensions, which are computed based on a number of indicators.

In August 2021, the central bank said FI-Index has been conceptualised as a comprehensive index, incorporating details of banking, investments, insurance, postal, as well as the pension sector, in consultation with government and respective sectoral regulators. The index is responsive to ease of access, availability and usage of services, and quality of services.

According to RBI, a unique feature of the index is the quality parameter which captures the quality aspect of financial inclusion as reflected by financial literacy, consumer protection and inequalities and deficiencies in services.

The Reserve Bank Of India said on Monday that India added 46.7 million jobs in the fiscal year ended March, far exceeding numbers in private surveys that point to high unemployment rates.

The employment growth rate was 6% in 2023/24 versus 3.2% in 2022/23, the RBI data on measuring industry level productivity and employment showed.

Analysts linked the lack of jobs and high inflation with PM Modi’s failure in polls last month to win a majority in the directly elected house of the parliament, meaning he had to rely on allies to return to power for a third term.

India’s total employment stood at 643.3 million in 2023/24 versus 596.7 million in FY23, RBI data showed. The central bank uses data from the government’s National Accounts and Ministry of Labour to extrapolate the country’s productivity and employment levels.

The report, a routine release from the central bank, has traditionally only shown historic numbers. On Monday, however, the central bank said it is attempting a provisional estimate of productivity for the total economy for the first time for the financial year 2023/24 based on available information.

The release of the data follows a Citibank report last week that said growth of close to 7% will only create 8 million to 9 million jobs in India, short of the 11 million to 12 million needed.

“Even 7% GDP growth might not be able to fulfil the job requirement over the next decade,” Citi’s chief India economist Samiran Chakraborty wrote in the note.

In a separate statement, the federal labour department countered Citi’s report to say its estimates suggest an average of over 20 million employment opportunities per year were created between 2017-18 to 2021-22.

Another private think tank that tracks joblessness in the country, the Centre for Monitoring Indian Economy, had estimated the unemployment rate in India rose to 8% in fiscal year 2023-24 from 7.5% and 7.7% in the preceding two years.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)