Monetise the Demonetization

February 4, 2017by piyush golani0

‘Demonetization’ has been the latest buzzword floating in the Indian economy impacting over 1 billion people in the nation as well as those residing overseas.For those of us still struggling to understand what it really means, it is primarily the process of stripping a unit of currency of its legal status as a tender.


Post the declaration that notes of 500 and 1000 are no longer legal tenders, banks all over the nation experienced a lump sum influx of cash deposit.


Government’s vision to bring transparency and improve the economic scenario of the country is followed by a trail of consequences rippling in various sectors of the national functioning.


The Indian populace has to deal with various issues as the short-term aftermath of demonetisation. In the long run, though, with the strategies laid out around the demonetisation, the backbone of the Indian economy, the banking setup is armed with large cash reserves to be deployed for the development and growth of the nation.


This leads to the key question for the commoners – how do we make the most of the Demonetisation?


The exponential surge in deposits has led to surplus liquid funds and excess money for banks to lend. SBI Chairman, Ms. Bhattacharya spoke about “fall in lending rates” with the inflow of deposits in the bank.


SBI has since then slashed the interest rates for deposits in order to replace the higher cost of borrowing with lower ones. The cut in the deposit rate by banks in the likes of HDFC, ICICI, and Canara, is a hint towards the dropping of lending rates too.


Positively, this is impacting the loan seekers, as most of the banks are now in the process of lowering the loan lending rates significantly following the move. Lower interest rates would mean that borrowing loans during this time becomes cheaper benefitting the fund seekers.


The indication is towards a lucrative period of availing for a loan as we welcome this interesting macroeconomic effect. However, even those who had earlier opted for the floating interest rates on loans will benefit from the move.


Apart from personal gain from borrowing money from banks during this time, lower interest rates, all else being uniform, will also bring a boost to the economy.


There will be the increase in investment by the lending institutions in different industrial segments and the rise in cash circulation will improve the market scenario, leading to declining in inflation rate and improvement in spending trends amongst the commoners.


Furthermore, with the focus on digitalisation, the unorganised sector that consists of the major chunk of the Indian economy, will gradually start moving towards an organised setup.


This movement will ensure the reduction in unrecorded transaction bringing forth previously unaccounted money back to the system leading to a more robust cash flow cycle with proper monitoring and evaluation.


With the increase in industries moving towards the organised sector and ever growing number of bank accounts, the salaried personnel with the improved cash flow settings will be eligible for different loan products of the lending institutions. The improved eligibility can be utilised for the better standard of living by opting for the home loan, car loan, education loan or personal loan to satisfy their day to day needs.


As the rates are being softened for deposit and lending in the banking system, the wise thing will be to monetise this opportunity.The population can encash the offered opportunity by availing for a long procrastinated loan by taking advantage of the low interest rates on lending.


One can assess the personal needs, research on the prerequisites of availing for a loan and check the loan eligibility to strike while the iron is hot.  Long queues are not so blue after all!


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