CMA Rakesh Bhalla

DEMONETISATION : A Misguided Missile fired in Haste – But we should support smooth implementation in Larger interest of “ Great India”

I appreciate the intention of the Government for demonetisation of the currency as it might have taken in good spirit for betterment of people as well as our nation.

However, following questions/issues which are being circulated through media / social media still remained unanswered which is raising doubts in the minds of common man and need to be clarified :

1) Secrecy of the whole operation

Honb’le Prime Minister & Finance Minister repeatedly & strongly stated that this development was kept as top secret which was known to few people only before 08th evening. At this level, this statement is very significant & we believe that it is true but the following evidences are creating doubts regarding the authenticity of their statement:

– How news dated 27th October 2016 appeared in Dainik Jagran, one of daily newspapers that Rs. 500 to Rs. 1000 notes are going to be withdrawn & now Rs. 2000 note will come ? (Source: Dainik Jagran dated 27th October 2016).

– How & Why in one of the state units of BJP, deposit of Rs. 3 crores in bank accounts was made immediately before announcement of demonetisation on 08th November ? (Source – The Tribune dated 11th Nov. 2016 & The Times News Network dated 12th Nov 2016). Out of Rs. 3 crores, Rs. 60 lakhs deposited hours before & Rs. 40 lakhs were deposited minutes before the announcement of demonetization scheme by the PM at around 8 pm. This does not seems normal deposit. Information is available for one account only but there are lakhs of accounts of various units of BJP and other political parties where majority of so called black money could have been deposited.

How the deposit was made by BJP unit even after the normal business working hours of the banks & just before the announcement?

– Recent RBI reports stated that  the percentage of deposits in various banks such as SBI, PNB, UBI and Bank of Baroda, has considerably  increased in July-September Q2 compared to the previous quarters. Opposition parties claimed that Rs. 5 lac crores have been additionally deposited which is one third of total currency of Rs. 500/1000 notes, in response to such increase in deposits, FM made an unimpressive statement that the increase in deposits was primarily on account of payout of arrears of 7th Pay Commission (arrears were only Rs. 34 thousand crores against deposits of Rs. 5 lac crores) – ( Source India.com & various news items)

2) Writing off of multi-crores corporate loans by banks

As per the media reports, one of the major banks has written off multi crores loans of various corporate houses including Vijaya Mallaya Group. There may be more banks who have done it in the name of NPA.

Was there any nexus between write off of multi crore loans with this Note Bandhi decision?

3) Appointment of Mr Urjit Patel and removal of Mr. Raghuram Rajan as Governor of RBI

–  As per tele-broadcast dated 13th November 2016, Honb’le Prime Minister has stated that this preparation was started 10 months back & Government also asserted that printing preparation was started six months back (Time of India 9th Nov 2016). It seems right also as such huge currency printing cannot be done in one & half month time.

–  But question arises : –

  • Since this is reported that Raghuram rajan opposed the decision, whether preparation & printing has been started without the consent of Mr. Raghuram Rajan-How it is possible? Has PM/FM directly taken the decision without consent of Governor of RBI?
  • If printing started more than one & half months back with the signatures of Mr. Urjit Patel, then

a) Was appointment of Mr. Urjit Patel (who happens to be associated with Reliance Group owned by Ambanis) and removal of Mr. Raghuram Rajan already pre determined?

b) Whether there was any nexus between removal of Mr. Raghuram Rajan, write off of loans of various banks & decision of demonetization of currency?

c) Whether appointment of Mr. Urjit Patel was strictly on Merit?

After De-Monetization

How Government is ensuring that so called black money which was in circulation has not been converted into fresh currency after using following left out loopholes resulting into irreparable loss : –

A) Government has declared the deposits upto Rs. 2.5 lacs in normal bank accounts & upto Rs. 50000/- in Jandhan accounts without any scrutiny.

There are crores of accounts of various individuals in different banks. These accounts can easily be used for conversion of Black Money into White by allowing free flow of deposits below Rs. 2.5 lacs without scrutiny.

B) Our country has a population of 125 crores & if ID cards of 1% people is used than much more than the whole black money in cash can be converted by this mode only. It is pertinent to mention here that upto first 10 days there was no bar on use of one ID card in ‘n’ number of  Banks / branches.

C) Black money can easily be deposited or used showing it Agriculture & other exempted incomes. What steps Government has taken to block this?

D) There is an increase in purchase of Gold in Tons & other costly items for cash both before & after the decision? How it is ensured that this was not black money?

E) Another method of converting black money is deposits shown by Religious places like Temple, Gurudwara etc. What action has been taken by the Government to ensure the genuineness of the transaction?

F) Since accounts of political parties do not come under RTI or Income Tax, they don’t have to disclose the reasons of such deposits. The whole money in cash can be deposited in these types of accounts. What action has been taken by the Government to ensure the genuineness of the transaction?

G) Other means which are being used for converting black money into white is

  • Conversion of old currency into new one by commission agents at 20-40% conversion charges (Refer-Media sting operation).
  • Property being purchased & sold against old currency (Refer-Media Sting operation).
  • Even after 8th Nov Govt allowed to use old money for various payments including Govt Payments / Taxes / Payment of Bank loans & some others . How Govt ensured that use of old currency notes at these places is not use of Black money .

Fake Currency :

No doubt there are fake currency notes in circulation . But fake currency which is in circulation is which is being received  by common man in good faith. So they will suffer not those who are actually culprits for printing & circulation. Other type of fake currency is, which is not in circulation will be dead money for them but this cost them just printing cost nothing else. Moreover how Govt will ensure that New Currency Notes specifically Rs 2000 notes will not be printed by Fake currency dealers . We should understand this is not Rocket Technology . If they can print old currency what is special in new currency ?

Even new currency notes of Rs. 2000 (though not fake ) were found with the terrorists killed recently during encounter.

Future stoppage not ensured

It is pertinent to mention that if generation of Black Money is not stopped than this demonetization exercise by the Government will not be fruitful & may result into another Big Scam.

– No effect on big fishes &  they may escape unhurt.

– Harassment to common man

  • Farmers affected – selling of perishable produce at throw away prices, loan at higher rates from commission agents (arhtiyas) for seeds, suicide cases by farmers may increase

As ours is an agriculture dominated economy, the above factors may disturb the whole economic development of our nation.

  • Small businessmen / Daily wager dealing on cash already been affected.
  • General public will be affected.
  • Negative effect may be on Job Market .
  • Recession in General & in particular in property market – On one hand we can say that cheaper property will be available and on the other hand, genuine investment in property will diminish & General recession is not good for any economy.
  • As per Opposition parties, more than 50 person have died which can be considered as after effects of demonetization operation. If it is true then who is responsible for all this?

Benefit – Liquidity may improve but may have negative effect on Retired Class Individuals

Although liquidity position of the Banks will  improve and Interest rates may come down and may be beneficial to big businessmen & corporates but at the same type decrease in rates of fixed deposits will have negative effect on Retired Class whose main income is interest.

Whether this loss has been intended by the Government at the cost of small gain from demonetization?

Moreover as per recent estimate only 6% of the black money is kept in the form of cash and therefore much more can be converted & the said objective of the Government may not be achieved.

Earlier also demonetization was implemented in nine countries & failed to achieve the desired objectives of curbing the black money in majority of cases.

Though this move is not less than “ Misguided Missile fired in Haste” just to have political gain specifically in forthcoming state election but I think we should support in the smooth implementation of the move considering bigger interest of “Great India” as decision has already been taken by Government elected by us only & roll back now will be another  disaster.

Jai Hind

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73 responses to “Demonetisation : A Misguided Missile fired in Haste”

  1. amulya mohanty says:

    Nice acceptable ……..de new 500 and 2000 notes would have been replaced by the same size that of de sizes of old 500 and 1000 notes which could hav been easily used in ATMS.Becoz of different size the softwire is required to be changed for transaction in ATMS WHICH took a long time.And yet now all the ATMS are not updated.Thanx to all my valuable Readers those who understand my thinking ……….

  2. Brij says:

    By allowing 50%tax and 50%tax is extension of schescheme closed on30/09/16.second change of 500&1000rs notes to new currency’s.This is outcome of demonitisation . Which can be done by parallel use of old and new currency notes and withdrawal of old notes in a specified time..What required to take such an awesome rout ,Govt please come out what /why war type situations has been created.

  3. Sandip Kr. Das says:

    very good article. Thanks.

  4. CA. S.C.Podder says:

    Good information .

  5. Rakesh Didwania says:

    nice & unbised article

  6. Paru says:

    Except a few intelligent people like those in Tax Guru, rest all seem to be fools, especially, Arun Jaitlewy, Urjit Patel, Raghuram Rajan and the likes. I am surprised at these jokers writing articles on this move of Demonetization. Dear ”knowalls” kindly just follow. Don’t try and lead. We have enough jokers doing just that.

  7. Stan says:

    Demonetization was only a desperate cure to a helpless situation. The alternative was to put a few well-known politicians whose daily earnings run into 8 figures behind bars. But then, you dont want to commit harakiri. Terrorism is a rampant business wherein seasoned politicians, no better than looting colonialist, are shrewd enough to dump responsibility on the other side. Demonetization is thus only a temporary cure and things will return back to normal with minimum charge of Rs.2000/- to recover losses.

  8. CA/. Bhavesh Savla says:

    most of the article is based on rumours which the author has not even tried to veify. Did he go and check with Dainik Jagran whether actually that article was written? I went ot dainik jagran website, choose lucknow edition and page 14. no such article appears. that page is photoshopped. looks like author is faon of kejriwal that he is following rumour mongering policy.
    And you are naive to suggest that money was deposited. How does it make difference if rs., 1 cr was deposited before or after announcement? It is still going to get reported in AIR by bank?
    Have you gone crazy.

    Bring facts on ground.

    • Rakesh Bhalla says:

      This is a published article, are you checking all the newspapers regarding printing of various articles? The article written is based on the facts/ logics and figures available , rather than making general statements we as respectable citizens of India should not indulge in blaming other/ s policy measures.

  9. Praveen Narayan says:

    Dear CMA Rakesh Bhalla,

    I have few doubts in the points you mentioned:-
    1. About secrecy- You said BJP units have deposited huge cash immediately before demonetization declaration- My doubt is what do they benefited from depositing the cash on 8th instead of 10th?
    In my opinion there is no difference, they will be answerable if the money is unaccounted.

    2. About increase in deposits in Q2

    Doubt:-
    a. what is the % of increase in deposits compared to Q1- 2016-17?
    b. what is the % of increase in deposits compared to Q2- 2015-16?
    c. Only BJPs made deposits in Q2?

    3. Writing off of multi-crores corporate loans by banks :-
    Do you really think, after this writing off, these loans are become not claimable? In my knowledge the claim of the banks still persists.
    I thought this allegation is only of a lay man who does not have knowledge of these technical terms. I found myself wonder you are a CMA…!

    4. Appointment of Mr Urjit Patel and removal of Mr. Raghuram Rajan as Governor of RBI:-

    a. Who had in fact REMOVED Mr. Raghuram Rajan as Governor of RBI?
    b. Has Mr. Raghuram Rajan as Governor of RBI made a statement that he had opposed the decision?

    5. After De-Monetization

    a. Some people believe that they successfully converted their black money into white by depositing cash upto Rs.2.5 Lakhs in different accounts. But it is not so. The game is just started. All deposits above Rs.50,000 will be reported to IT dept and they will be chased.
    I accept 20%- 30% black money holders may be escaped, but not more than that.

    b. It is not so easy to convert black money into white-
    – simply showing it as agricultural income.(since all transactions above Rs.50k is being tracked)

    – Investment in Gold-
    i- the investors will be booked when they make sale. and the price of gold will going to be diminishing, make a loss to the investors.
    ii- There was huge sale of gold on 8th evening- My doubt- the sellers can not simply escape from the trouble- they have to show it as their sale, pay income tax; (many are in real trouble of explaining quantitative data of their stock)

    – Donations to Political parties/ temple-
    i. Under Section 13-A, income by way of voluntary contributions to a political party is not taxed. This exemption can only be availed if the party in question maintains a book of accounts with respect to these contributions.
    ii. another doubt:- is it so easy to donate black money to temple/ political party and get it back as white money??? If yes, please let me know few means to do it…!

    – Other means which are being used…:-
    i. Through agents- In the chain, one person has to put the money into bank account to make it new currency. They will be caught. I accept about 20% of black money would have been converted as white.
    ii. Property being purchased & sold against old currency- In the chain, one person has to put the money into bank account to make it new currency.
    and the investor will be suffered huge loss due to reduction in value of land in coming period.

    – Allowed to pay taxes / Payment of Bank loans
    i. Any payment of tax have account and there is a limit too- you can not pay as much as you want.
    ii. All repayments of bank loan will be tracked.

    – Fake currency- I agree, there will be new fake currencies. But this could be curbed by stringent measures to ensure online payments on high value transactions.

    – I agree there are many difficulties to common man

    – negative effect on Retired Class Individuals
    Low rate of interest will lead to low cost of living, that will automatically adjusted. ( Getting high interest and High cost of living is equal to low interest and low cost of living)

    – The benefit demonetization will much more than the cost….:) Be optimistic..:)

  10. Kamal Modi says:

    The writer is just naive. He is accusing that BJP Party deposited large amount of money in the bank just before the announcement. For your info, they have DEPOSITED IN THE BANK WHICH THEY STILL CAN DO EVEN AFTER ANNOUNCEMENT. Since it is deposited in the bank, it is accounted money. Depositing before or after announcement does not make any difference.

  11. Ganeshram says:

    Sir you Being a CA is talking like all other Politicians.
    The Banks have not written off Big Bad Loans.
    They are free to take action for recovery , you know accounting practices.
    It will defenitely have Positive effect and all Opposition Leaders are Exposing themselves as Gaurdians og Black Money & Corruption, which Shri Modi wanted the Opposition to take Knee Jerk reactions and fall into the WEB woven by him.
    So I humbly request to be a Professional and Strictly follow Ethics as laid down by ICAI
    Warm Regards
    Ganeshram
    Iam an Entrepreuner and an Engineer.

  12. k c agarwal says:

    I TOTALLY AGREE WITH THE WRITER

    • Praveen Narayan says:

      Dear CMA Rakesh Bhalla,

      I have few doubts in the points you mentioned:-
      1. About secrecy- You said BJP units have deposited huge cash immediately before demonetization declaration- My doubt is what do they benefited from depositing the cash on 8th instead of 10th?
      In my opinion there is no difference, they will be answerable if the money is unaccounted.

      2. About increase in deposits in Q2

      Doubt:-
      a. what is the % of increase in deposits compared to Q1- 2016-17?
      b. what is the % of increase in deposits compared to Q2- 2015-16?
      c. Only BJPs made deposits in Q2?

      3. Writing off of multi-crores corporate loans by banks :-
      Do you really think, after this writing off, these loans are become not claimable? In my knowledge the claim of the banks still persists.
      I thought this allegation is only of a lay man who does not have knowledge of these technical terms. I found myself wonder you are a CMA…!

      4. Appointment of Mr Urjit Patel and removal of Mr. Raghuram Rajan as Governor of RBI:-

      a. Who had in fact REMOVED Mr. Raghuram Rajan as Governor of RBI?
      b. Has Mr. Raghuram Rajan as Governor of RBI made a statement that he had opposed the decision?

      5. After De-Monetization

      a. Some people believe that they successfully converted their black money into white by depositing cash upto Rs.2.5 Lakhs in different accounts. But it is not so. The game is just started. All deposits above Rs.50,000 will be reported to IT dept and they will be chased.
      I accept 20%- 30% black money holders may be escaped, but not more than that.

      b. It is not so easy to convert black money into white-
      – simply showing it as agricultural income.(since all transactions above Rs.50k is being tracked)

      – Investment in Gold-
      i- the investors will be booked when they make sale. and the price of gold will going to be diminishing, make a loss to the investors.
      ii- There was huge sale of gold on 8th evening- My doubt- the sellers can not simply escape from the trouble- they have to show it as their sale, pay income tax; (many are in real trouble of explaining quantitative data of their stock)

      – Donations to Political parties/ temple-
      i. Under Section 13-A, income by way of voluntary contributions to a political party is not taxed. This exemption can only be availed if the party in question maintains a book of accounts with respect to these contributions.
      ii. another doubt:- is it so easy to donate black money to temple/ political party and get it back as white money??? If yes, please let me know few means to do it…!

      – Other means which are being used…:-
      i. Through agents- In the chain, one person has to put the money into bank account to make it new currency. They will be caught. I accept about 20% of black money would have been converted as white.
      ii. Property being purchased & sold against old currency- In the chain, one person has to put the money into bank account to make it new currency.
      and the investor will be suffered huge loss due to reduction in value of land in coming period.

      – Allowed to pay taxes / Payment of Bank loans
      i. Any payment of tax have account and there is a limit too- you can not pay as much as you want.
      ii. All repayments of bank loan will be tracked.

      – Fake currency- I agree, there will be new fake currencies. But this could be curbed by stringent measures to ensure online payments on high value transactions.

      – I agree there are many difficulties to common man

      – negative effect on Retired Class Individuals
      Low rate of interest will lead to low cost of living, that will automatically adjusted. ( Getting high interest and High cost of living is equal to low interest and low cost of living)

      – The benefit demonetization will much more than the cost….:) Be optimistic..:)

  13. niran. says:

    Rs.500 and Rs.1000 now called SBN are not black. Black money is the wealth acquired for desirable, or socially undesirable activities( Dr./ smuggler), which were not taxed? Efforts should be made to unearth such wealth and tax appropriately.
    Demonetisation in parts for Utility bills is discrimination in favour if big players.
    All big deposits since April 2016 may be investigated 100 percent. Tax authorities should do it chronologically from 1.4.2016.
    Our nation has lost almost 100000 cr by reduced work, lower trade volumes, lower spending, lower tax collection, lower production, wage loss etc.
    This will create unemployment.
    Take time to rebuild.
    Till then 65% Indians are anti national! Non-Bharatiya. Demonetisation may be effective with working ATMs. Till adequate cash is given, all transports, school/ college fees, hospital fees, cremation charges should be free for all.

  14. Naresh sharma says:

    Will demonetization really lead to any significant change ?It may not:
    The elements of black money are :
    1. Election : All political parties indulge in money laundering during elections and otherwise.Huge hoarding are put up on birthdays of ministers,anniversaries etc
    2. Banned Items: Liqour ban and price regulations create black money
    3. Procedure o admissions to schools and colleges etc_ perpetuate black money
    4. Red Tapism and Authority Excercise : This creates black money
    5. Nefarious individual needs: This creates black money
    6. Agricultural Economy:Large part of agricultural land is owned by minuscule population creates black money
    Since Society cannot run without some controls, ad human needs are in built and people in power over have right to dictate masses, the menace o black money will continue
    Like Fountain, it will attain its own height
    :

  15. Anil says:

    Mr Bhalla.. I pity your wisdom. Let every one deposit his money by showing it as agricultural income, Naga tribal accounts or in Jandhan account. Let it come in system. PM wants this. Depositing money minutes before declaration is not possible as declaration was done at 8PM and all banks were closed by this time. Anyway money is being deposited in account…

  16. Sahil says:

    Being a chartered accountant, I completely agree with your article. My very initial response was very good move. But when I got the statistics my opinion changed and I was very much disappointed too for the political gain how a person who is worshiped like a God today in India can take such an hasty decision. As you mentioned even I too respect the Govt decision because I don’t want to see one more disaster on account of roll back.

  17. ganesh says:

    Hi,
    If there are 10 facts which tries to say that demonetization was not kept secret – what is the harm in that. Does any one have any evidence. Based on news article published in website – good work of the policy makers cannot be commented. In last 68 plus of independence, none dared to take such bold decision.
    Any critic is anti-social citizen. Demonetization was only a trailer but complete picture is unknown to one and all. Policy decision taken by Government under leadership of PM is to be supported by every patriotic Indian and constructive criticism will be acceptable and not otherwise. Look at the impact with policy change – so many activities has given livelihood to many sectors – right from zerox copying; cash transporting etc.
    Thomsas Friedman L – said that THE WORLD is FLAT. Let us contribute to nation building.
    Dear author – spend time to research on positives of Demonetization and avoid negative comments.
    Every action will have opposite reaction. GOVERNMENT OF INDIA – Slogan says – GOVERNMENT WORK IS GOD’S WORK – who are we to comment. Life is a circle and crooks will face consequences at appropriate time. What did Arvind Kejriwal say before Delhi election and what is he doing now – Jai Hind.

  18. YPS says:

    I fully agree with the writer. Since accounts of political parties do not come under RTI or Income Tax, they don’t have to disclose the reasons for such deposits. Moreover, there are so many other exemptions available at various levels e.g.to Trusts, Area based exemptions as in North East or to other states, etc.,even under Jan Dhan Yojna; their misuse by adopting various tactics cannot be ruled out.

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