WEEKLY FINANCIAL SNIPPETS – 03/12/2016

1. PRACTICAL (POSITIVE) ASPECTS OF DEMONETIZATION: We are herewith highlighting some of the true facts which have a positive effect on the economy as a whole due to demonetization. Though this may sounda bit crude but these are the real facts: A) TRADERS/BUSINESSMEN GOTTHEIR LONG OVERDUES BACK: Many a businessmen who

had lost long lost hopes of recovering their long overdue amount were in for a surprise as many of them have received back their dues in the form of old currency notes.

B) MANY A TRADERS COULD SELL THEIR OLD STOCK OF PRODUCTS: Traders who were hoarding their old stock of products could dispose them in exchange of old currency notes.

C) WORKERS GOT UP TO 6 MONTHS ADVANCE SALARY: The rich class who were hoarding black money, in a hurry to dispose the old notes have given hefty advance salaries ( up to 6 months also in some cases) to their staff like factory and office workers, servants, drivers etc. This is a big boost to these poor people.

D) POOR JAN DHAN ACCOUNT HOLDERS HAVE BEEN BENEFITTED: The rich class who were hoarding black money have found a new way to deposit their ill wealth by convincing the poor to deposit their money into their respective Jan Dhan accounts, ofcourse may be for a monetary benefit. And this is the main reason why these JanDhan accounts are flush with funds now as reported by the media.

E) MUNCIPAL CORPORATIONS RECEIVED THEIR LONG PENDING DUES OF PROPERY TAX: Respective Municipal Corporations of various cities have been benefitted as they have received the long outstanding dues of property tax. People who were reluctant or deliberately not remitting their property tax to the corporationshave remitted all the arrears by making payment in old currency notes.

F) LOCAL POLITICIANS HAVE DISBURSED INTEREST FREE LOANS :Local politicians in some

of the rural areas across the country have disbursed interest free loans to the local people in the form of old currency notes, as reported by media.

G) BENEFITS TO LOW PROFILE YOUTH, IN EXCHANGE OF OLD CURRENCY :Many affluent

businessman have utilised the services of low profile youth for exchanging old currency in various banks, of course for a monetary benefit to these youths.

2 GOVERNEMENT WILL LEVY 50% TAX ON UNEXPLAINED DEPOSITS: Unaccounted deposits

made in old currencies up to 30th December 2016 will attract 50% income tax and a lock-in period of 4 years –IF IT IS DECLARED TO THE INCOME TAX DEPARTMENT. After levying tax at 50%, the half of remaining deposit (25% of the original deposit), will not be allowed to be withdrawn for four years& will not fetch any interest. But undisclosed money detected in bank accounts could attract a penalty up to 90% and a longer lock-in period.

3 DEMONETIZATION COULD HIT THE BANKS’ PROFITS FOR THE THIRD QUARTER: Due to the factors linked to the demonetization of high currency notes, the banks’ profits for the third quarter of this fiscal could take a serious hit. The reasons include the requirement that banks need to park 100% of their incremental deposits, under CRR temporarily with the RBI at zero% interest rate, slowdown in loan growth due to resources getting diverted for the on-going demonetization exercise, and operational expenses incurred in recalibrating the ATMs.