DEMONETIZATION AND DIGITAL MONEY

Aman

My father’s fiftieth birthday was last November. Anya and I had decided to go back to India to surprise him and spend a week with him before we returned to our universities in the US. Mom was in on this, and thankfully didn’t reveal our plan. Dad teared up when he saw me and Anya barge into the house at midnight, excited to bring in his birthday. We had a great night, laughing and reminiscing about the past.

A couple of nights after our arrival, we had just finished dinner and were settling down to watch something on Netflix, when Dad hurried into the room and, without asking me, switched to the news.

‘Hey! That’s rude, Dad,’ I protested.

‘Sorry, Aman. But I just heard that the prime minister has made an announcement about five-hundred and thousand-rupee notes. Apparently, they won’t be valid after midnight tonight.’

‘I don’t think that can be true,’ I said. But, as it turned out, I was wrong. The prime minister had made the announcement at 8 p.m., making both five-hundred and thousand-rupee notes invalid from midnight onwards. Only hospitals and petrol pumps would accept the old notes after that. People could exchange up to Rs 4000 at any bank for valid notes (like fifty and hundred-rupee notes) and they could deposit all their old notes into their bank accounts.

Everybody went absolutely nuts after the announcement. There were huge queues outside all the ATMs and banks, and the news talked about nothing else for weeks. I could understand some of the hysteria, but a lot of it seemed unnecessary to me.

Dad and Mom explained that there were two main reasons behind removing these notes from circulation. One, there were apparently a lot of fake notes floating around—ones that looked and felt exactly like real notes but were not put out by the government. Making these notes invalid would get them out of the system. Two, people who had black money (illegal money on which they hadn’t paid taxes) usually stored it in large denominations, like five-hundred and thousand-rupee notes. They would have to either destroy these notes or deposit them in a bank and pay taxes on them.

Demonetization made a lot of cash unusable, which meant the government had to ration the use of currency till they printed new notes to put back in circulation.

This was exactly the kind of thing that drove Dadi mad. She kept calling Dad and Mom and complaining about how difficult life was without cash. She had kept some money hidden from Dadaji and didn’t know what to do with it. Dad had to ask his friends in the banking industry to help her with it—I’m sure Nitin Uncle got plenty of calls!

One day, she called Dad frantically to tell him she didn’t have any cash at all on her and didn’t know what to do.

‘Everyone accepts cards, just use yours! You have one for a reason,’ Dad said in exasperation.

‘Don’t snap at her, Sandeep,’ Mom chided Dad after he put down the phone. ‘These things are tough to manage for people from their generation.’

‘But why can’t they use their cards just until things ease up?’ Dad demanded. ‘It’s not that difficult. We can lead a cashless life if we want to.’

‘What about Paytm?’ Mom asked. ‘Or any other mobile wallet? Has she signed up for any of them?’

‘Nope,’ Dad said. ‘And if I give her that option, I’ll have to spend the next month explaining to her what a mobile wallet is.’

He stomped off to his room, clearly in a foul mood. I looked at Mom, worried. ‘Should we call Dadi and try to help her out?’ I asked.

Mom hesitated but then shook her head. ‘Dad will call her back once he’s calmed down. Best not to interfere.’

‘But this must be tough for Dadi,’ Anya said. ‘I don’t think she’s ever used a credit card except in an emergency.’

Mom sighed. ‘She’ll need to learn, I guess. She knows about cheques, of course. But credit cards and electronic money transfers can be confusing even for people from my generation.’

‘How does an electronic funds transfer work, anyway? Have you ever made a transfer?’ asked Anya.

‘Yes, of course,’ replied Mom. ‘I’ve been paying Suresh his salary through electronic transfer ever since demonetization.’

‘How do you do that?’ Anya probed.

‘My bank helps me transfer money from my account to the driver’s account through NEFT. That stands for National Electronic Funds Transfer. I can make the transfer through Internet or mobile banking, or by filling in a form at my bank branch.’

‘But does Suresh Uncle have an account in the same bank as yours?’ I asked. Suresh Uncle has been our driver since Anya and I were toddlers.

‘Oh, that doesn’t matter,’ Mom said. ‘NEFT can be used to transfer money to any bank account; it doesn’t need to be with the same bank.’

‘But how are you paying the milkman and the newspaper guy?’ Anya asked. ‘You can’t be making electronic transfers to all of them, right?’

Mom shook her head. ‘I use Paytm. That’s what I was asking Dad about. It’s a mobile wallet.’

‘Oh, I use it too,’ I said. ‘It’s really convenient to split costs for a movie or coffee with friends.’

‘Clever clogs,’ Anya muttered. She hates it when I know something that she doesn’t.

I smiled at her smugly, while Mom explained, ‘A mobile wallet is very much like a real wallet. You can transfer money into your mobile wallet from your bank account or your credit card. Once the money is in your wallet, you can use it to pay for things. These can be online, like on a shopping website, or at a store, where you just need to scan a code using your phone and key in the amount you need to pay.

‘You can also transfer money from your wallet to a friend’s. All you need to know is that person’s mobile number. Even if they’re not using the same mobile wallet app that you are, they’ll get a notification on their phone and will be able to get the credit into their wallet.’

‘I don’t see the point of mobile wallets,’ Anya said when Mom finished. ‘I mean, they’re useful right now because there’s no cash, but why would I use one otherwise?’

‘It’s convenient,’ Mom said. ‘You only need someone’s mobile number to send them money. And because you don’t usually store too much money in this wallet, it’s safer—if fraudsters get ahold of your phone or wallet details, they can only steal the money you’ve put in the wallet.’

‘But what if you need to pay someone a big amount?’ Anya retorted.

‘Then a mobile wallet might not be the best way to do it,’ Mom replied. ‘They’re designed for smaller payments. Also, if you put a lot of money into your Paytm wallet, you’ll lose out on the interest that you would have got if you’d left it in your bank account.’

‘Well, I still think Anya and I should call Dadi tomorrow to try and help her,’ I said. ‘Mom, I’ll tell Dad before I call her. I don’t think he’ll mind.’

‘Sure,’ Mom said. ‘Just don’t lose your temper with Dadi the way Dad did!’

MONEY MATTERS

Exercise 1

Let’s say you want to transfer Rs 2000 to Anya’s account. What are the different ways of doing it?

Exercise 2

Talk to five different people in your neighbourhood and write a note on the effects of demonetization that they have felt.

Exercise 3

Notes of which denomination were taken out of circulation during demonetization?