There are at least three occasions when official representatives of the government or major institutions have referred to the government using the money deposited by citizens in banks for development. None of these statements have been refuted by any official government spokesperson.
This here is Sambit Patra on the 19th of November 2016
https://www.youtube.com/watch?v=raHd8mteJsU
(Around time 0:16): “… where would this money go? This money is deposited in Indian bank. Not in someone’s personal account. This money would be for the poor people’s affair. It would be for infrastructure. It would be for roads…”
On the 5th of January 2017, in an interview published in The Hindu Businessline, Pankaj Patel, President of the FICCI says ‘Post demonetisation, money with banks should be used for infra projects’. The last line of the first question of the interview:
This large amount of money that is available with banks has to be used for infrastructure projects in a big way, and it can help increase demand.
Today, Nirmala Sitharaman has said that the money deposited in the banks can be used by the government for developmental activities.
Old notes are in the bank, the govt can use it in developmental activities: @nsitharaman
Image – ANI pic.twitter.com/Zg2hZODYKO— News18 (@CNNnews18) January 7, 2017
The money deposited in banks belongs to the account holders. The bank further gives it out on credit and earns an interest on the loans generating revenue for themselves, and passing some on to the depositors. The money available for the banks to use is the money it generates as interest from loans. The government doesn’t use any of this money. Funds available to the government are those raised from taxes and such or any revenue the RBI makes as profit and transfers to the government.
Banks are actually going to be in trouble for revenue, as deposits in banks have gone through the roof, while the demand for loans is still low. So banks will have to pay out interest to depositors, but their means of raising interest by lending money have not increased in proportion. In a situation like this, it is alarming to hear that the government would use the money in banks for anything – development and infrastructure or otherwise.
Given the complete impunity with which the government has disregarded citizen rights during demonetisation, is the next shock going to be losing our funds to the government spending sprees?
Modi sarkar needs to clarify. Fast.
If uma Bharati thinks that 99% population standing in front of the #ATM 4r withdrawals of their money is Karl Marx’s economic philosophy by @Modi_G. Probably she is making fun of her arch rival @arunjaitley
I think what these politicians àre talking about is grossly incorrect. They think that the old notes that have been deposited are now of no use to anybody so they can be used by the government for infrastructure projects. Either they are supremely stupid or are just saying this to please the public which they think is supremely stupid. The old notes are not with banks. They’ll be destroyed and RBI has to replace them with new notes. The banks have high deposits, low loans and limited cash to give to customers. If there’s any panic and bank runs in the country the entire economy will crash worse than ever in history.
We need to distinguish between circulating money for $2 trillion India economy & that of stagnant stored Currency with respect increased use debit /credit Card plus Internet / Digital banking( with respect to paper Currency)
with this statical information the @RBI sud make all out efforts to restore the need of paper Currency first then withdraw high end Currency slowly by replacing with low end Currency. By Nature high end Currency will be pushed to bank & then to @RBI.
Please note Indian Economy was holding let of stagnant Currency in Rural economy & black money hoarding in cities. Because of this the actual paper Currency requierd is far less than the money that was in economy before Demonetisation. Therefore their is no need to panic for Disruption of economic activity.
Govt has not done its basic research before Demonetisation implementation, even then there was no collapse of the economy but slow down is under way.
This is totally freeEconomics, it is was intended for black money but ends ups with expidating digital transaction, efficiency in money utility & tax collection efficiency
You’re right of course but this is not a case of the Govt using this moeny for development or whatever. Its more, I think a case of the likes of Sambit Patra, and Nirmala Seetharamam being utterly ignorant of how moey and banking works. The Govt can raise as much money as it wants to by issuing debt (Govt Bonds) There’s a cost of course in the the GOvt will have to pay interest to its creditors. So its complete rubbish as you point out that the the 15 lakh crores that have been deposited adds significantly to the 125 lakh crores already deposited with banks (these are people’s savings). And as you say, there was not a pent up demand for bank credit that was going unmet. The Government has botched its economic policy copybook badly with this Demonetisation disaster.
I agree with you Govt can only make policy, how Banks sud function through #RBI. This money was in circulation through bank or Otherwise. Large share(50 to 60%) of this money is short Duration , Keep Changing hands for $2 trillion #IndianEconomy. 20 to 30% is of medium term & 10 to20% is long term.
Infrastructure can only founded by long term savings like #insurance, long term bonds etc.
Short term money has to go back to circulation through bank.
Medium, long term money is available respectively 4r lending but with out risk.
Only advantage of Demonetisation is efficiency of money utility & tax collection.
Agree entirely.
You are right about the money belonging to individual account holders but banks give out not only the interest they earn but also a fair amount of capital deposited as specified by the RBI also known as CRR. In case of Public Sector banks, the government always has a say and funding for infrastructure projects like ports, dams and airports is given to corporates or public sector infrastructure companies like NTPC or IRCC. So the money in deposits is in circulation which is good as jobs are created as also the infrastructure. The reserve specified is available to keep enough cash in circulation.
With maximum volume of demonetised currency now back in the bank accounts, where is the black money?
Banks have to lend to pay interest to the depositiors. One needs to have stastical information about what kind of money is this, short, medium & long term in %. Defnitly not the long term like infrastructure.
Short & medium term risk Free loan can be given from these deposits. But the corrupt banking system with political inteference is the big issue in lending& Recovery
Didn’t Uma Bharti mention that Modi is implementing Karl Marx’s idea through demonetization?