One year of Demonetisation: Kashmir's economy still in doldrums; security at banks, ATMs remains a concern

Editor's Note: As BJP government's demonetisation drive completes a year, we take a look at how it has impacted different states in India. This article was originally published on 2 November, 2017.

Manzoor Ahmad Bahadur, the white-bearded, short-haired owner of Noor Medical Hall, a chemist shop in Srinagar's posh Jawahar Nagar area, was reluctant to accept Rs 500 and Rs 1,000 currency notes from people in the weeks following last year's demonetisation announcement. He was afraid that depositing these notes at banks would invite legal trouble.

When Prime Minister Narendra Modi demonetised high value currency notes on 8 November last year, Kashmir was facing protests following the killing of Hizbul Mujahideen commander Burhan Wani. All businesses, including shops and industries were shut, and only chemists and doctors were allowed to function.

Jammu and Kashmir has among the highest proportion of banks and ATMs in the country. Reuters

Jammu and Kashmir has among the highest proportion of banks and ATMs in the country. Reuters


But Ahmad was fearful that accepting the demonetised notes may invite accusations of hoarding black money, especially since even dealers who supplied him with medicines had stopped accepting the notes.

Unlike other parts of India, in Jawahar Nagar, as elsewhere in Kashmir, there were no queues outside ATMs, and even bank branches that were functioning didn't see much crowds. That was not only due to the shutdown, which had reduced the need for cash, but also because people would prefer keeping money in the banks rather than at home.

"I used to accept Rs 500 and Rs 1,000 notes initially, but I stopped. I was afraid it would land me in trouble," Ahmad said. "My wife had some Rs 1,000 notes and I got them exchanged from the bank, but I wasn't going to accept more of these notes from customers."

As per the Jammu and Kashmir government's 'Economic Survey Report 2016', people in the state had already been depositing money in the banks. "In general, cash is deposited in banks by people of the state, which has now become a habit as it had become a compulsion due to militancy," the report added.

The PDP-led state government has credited itself for this. As per the Economic Survey report, there are more bank branches in Jammu and Kashmir than the rest of India. Of about 1,998 bank branches in the state, 934 are in Kashmir, 998 in Jammu and 65 in Ladakh. And with over 20 lakh households in the state, there is, on average, one bank branch for about 1,000 households. The national average is one branch per 1,800 households, the report added. Also, of the 2,260 ATMs in the state, 1,011 are in the Kashmir Valley.

However, this large network of bank branches and ATMs has created a major security issue for financial institutions, especially since militants had begun targeting and robbing these banks. In a meeting convened by the Jammu and Kashmir State Level Bankers' Committee (SLBC) to discuss the security scenario in Kashmir, its impact on the functioning of bank branches and for chalking out necessary safety measures, it was emphasised by the different banks that there is "a need to revisit and upgrade the security mechanism in view of the emerging challenges in Jammu and Kashmir".


In the meeting, Parvez Ahmad, convenor of JKSLBC and chairman of the Jammu and Kashmir bank, had noted that the security issue had been taken up with the state government. During the meeting, the different banks had noted that the security conditions "discourage banks from doing any expansion of their branches", which is "badly needed for deeper penetration in the state".

In the meeting, officials of the State Bank of India (SBI) informed that the bank has a network of 26 ATMs in Kashmir, of which 10 were stolen by a "gang of miscreants".

Vice-president of Jammu and Kashmir Bank, Rakesh Gandotra, said that the bank beefed up round-the-clock security after the robbery incidents. "Armed guards are being deployed at all times. They work in eight-hour shifts throughout the day and night to provide security at all bank branches. Earlier, security was only provided during the day," Gandotra said.

Apart from the private security guards, he said, banks are also deploying police personnel for security at the branches now.

The state's economy has been hit badly by demonetisation, they said. Mushtaq Ahmad, former president of the Kashmir Chamber of Commerce and Industries (KCCI), said, "The economy has been badly hit. Nearly 60 percent business has been lost. There is a general slump in the market and exports have also taken a hit. The effect of demonetisation was not immediately felt, since markets and businesses were already shut when it was announced. It's only now that we are realising its impact. Together with Goods and Services Tax (GST), demonetisation has resulted in decline of the market by at least 40 percent," he said.

Congress leader Ghulam Nabi Monga accused Prime Minister Narendra Modi of "fooling the country", saying demonetisation has neither helped curb militancy nor has it helped reduction in black money. Ahmad said that the move by the government to scrap the old currency notes has also not helped fight corruption. "Corruption has not stopped. It's still there and it has become severe," he said.


Published Date: Nov 08, 2017 08:13 am | Updated Date: Nov 08, 2017 08:26 am


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