There is a rush for cash as people are in a panic mode. How do you deal with these situation? A lot of people may be affected but largely the most affected is the bottom of pyramid.
Firstpost spoke with two personal finance experts -- Gaurav Mashruwala, certified financial planner, and Suresh Sadagopan, founder, Ladder7 Financial Advisories, to find out how the situation is affecting each sections of the society. Here's what they had to say:
Housewives: Essentials will not be an issue. Large majority buy milk from vendors where there are facilities of paying through coupons or through cash by end of month. Milk per se should not be affected by this cash crunch. If you are living in cities, you will have a credit facility or chopdi facility with your local grocer, kirana store. Big format stores like Grofers, Zopp, Godrej’s Nature Basket, Big Bazar, etc accept various forms of electronic payment – credit, debit cards, mobile wallet, internet banking. Kirana stores can be paid by cheques too. If you are buying fruits and vegetables from new vendors, then it may be an issue. Utility bills too can be paid with the annulled notes. So some old notes can be dispensed away in this manner too. In villages and small towns, people are far more familiar with each other and also vendors are known. So the inconvenience is expected or assumed to far lesser than big cities and metros.
Restaurants: Most Udipi joints use POS machines. Some of them used to allow this facility for bills above Rs 100 or Rs 150 but now you can pay Rs 70 for a cup of tea. “We can’t afford to refuse any customer as business,” Satish Shetty, proprietor, Thambbi vegetarian restaurant, Mulund. The facility was used six months ago and has caught up with the clientele of which 90 percent opt for this facility.
Healthcare emergencies: This could be an issue if you don’t have a bank account. Else, cheques can be issued, if you don’t have credit or debit card. Healthcare emergencies usual run into over Rs 1,000 and since most hospitals accept plastic money, it should not be a problem. But there are issues of doctors unable to provide change. In such cases, issue cheques or demand drafts.
Office-goers: If you are a regular train traveller, you will have a monthly pass or coupons that you would use. The government has said the railways has to accept the annulled notes of Rs 500 and Rs 1,000 denominations. If you travel by taxis, you could opt for online taxi aggregators like Ola, TabCab, Uber. If you travel by bus, you may have an issue and also if you travel by autorickshaws. However, it is a short-term issue as ATM dispense Rs 2,500 instead of Rs 2,000 daily; cash withdrawal has gone up to Rs 24,000 from Rs 20,000 weekly and also exchange of old notes from Rs 4,000 to Rs 4,500.
Small traders: Most of them have a credit facility with their suppliers and they are paid either fortnightly or at the end of the month. The cash crunch situation should not hit them simply because they avail of the banking system.
Foreign nationals: They are likely to be hit. PM Modi has been selling India as a tourist destination with the slogan athithi devo bhava or guest is god. A foreign tourist cannot be harassed by asking the individual to approach an airport counter to exchange money. Put foreigners on a high priority list and allow them to approach banks and get their money exchanged without waiting in queues. Foreigners are not exposed to the chaos we are familiar with in the country. The government should put measures to ease foreign tourists from being harassed or shocked by the chaos prevalent in banks and ATMs. The last thing the government wants is a foreign tourist to badmouth India.
Worst hit: Contract workers and migrant workers are the most affected. They get daily wages and if the contractor does not make provisions to pay them at the end of the day or pays collectively a large amount in a note that does not provide change easily like a Rs 2000 note for instance, it can be terrible. The migrant workers, daily wage labourers cannot avail of credit like the rest of the populations simply because they are not known faces to the locality and also cannot risk running a credit as they are not sure if they will get work every day.
The government should take cognizance of the fact that they are not familiar with banking facilities. If they stand in queues to change their cash, it means a loss of a day’s work for them. The government should allocate around 30 percent to 40 percent of cash that is being disbursed to banks and post offices to be set aside for daily wage earners, disabled and senior citizens as they are a vulnerable section of society.