What good or bad demonetisation has brought to the country is still a conclusion which remains too distant, industry experts opine the move has set a tone for formalising an economy which is predominantly run on cash.
Exactly a year ago on this day, Prime Minister Narendra Modi in his address to the nation had announced the scrapping of Rs 500 and Rs 1,000 banknotes, citing corruption, fake currency, terror funding as threats to the country.
A bone of contention between the government and the Opposition parties, the note ban was a highly secret move that shook the whole nation, drawing both criticism and praise from different quarters.
However, the goalpost on its objective was gradually shifted, with the government saying that the note ban decision would lead to the formalisation of cash economy as money flow through digital means can be tracked easily.
"It is now a year after the event and, on reflection, I feel that the impact for the banks has been largely positive. Besides, the fact that banks picked up deposits, during the demonetisation drive, a lot of small loans got paid off, many of which were sticky," said Parthasarathi Mukherjee, MD & CEO, Lakshmi Vilas Bank.
A spin-off from demonetisation has been the overall increased emphasis on digital transactions and that channel has seen a multi-fold growth, he added.
Bank unions, however, expressed their anguish on the anniversary of demonetisation, saying the government failed to compensation employees for the additional hours put in by them for two months.
The National Organisation of Bank Workers said employees are feeling cheated as the government has not heeded to their demand for compensation against the overtime.
It further said that the efforts of bank employees made demonetisation a success but they were left high and dry, it said.
Sounding optimistic, Ashishkumar Chauhan, MD & CEO of BSE, said it was definitely a bold and timely move.
"We have seen a considerable impact in the year that followed. The main objective of bringing unaccounted money into the system, and widening the tax base will definitely impact the economy positively going forward by making activities more formal and accountable," Chauhan said.
Aviva Life Insurance Chief Financial Officer Karni Singh Arha said that soon after demonetisation, the industry witnessed a sharp spike in cash payment of premium.
"Over time, we have seen even households from tier-2 cities that preferred cash getting comfortable with NEFT and ECS mandate. This huge behaviour change has significantly improved contactibility and will reduce unclaimed funds," he said.
Microfinance firm Village Financial Services MD and CEO Kuldip Maity said there was a fall in the number of clients and loan disbursals post note ban compared to three-quarterspre-demonetisation, but recovery seems to be returning in coming quarters.
"There were issues related to both loan disbursement and repayment...Amidst all these pains, we have to see the long-term benefits also. Post demonetisation, technology and digitisation have now become a priority for MFIs. Digital transactions got a major boost. The whole industry is thinking about gradually going paperless," Maity said.
How dependent is the Indian economy on the paper money is evident from the fact that the old Rs 500 and Rs 1,000 banknotes that were termed invalid from midnight November 9, 2016 formed almost 86 per cent of total cash in circulation.
Industry body PHD Chamber said effects of demonetisation are still persisting as demand in the economy is still lacklustre and business firms are still not enthusiastic in production process.
"We appreciate the efforts of the government...however, demonetisation drive has impacted the businesses directly or indirectly in terms of impact on demand and sales. The impact of demonetisation is majorly seen on small businesses as they are highly driven by cash transactions," said Anil Khaitan, President, PHD Chamber of Commerce and Industry.
India has one of the highest savings in the world as more than 85 per cent of savings were invested in non- performing and low-yielding assets. So, introduction of demonetisation had set a tone for moving towards higher financialisation and formalisation, said R Kannan, Head of Corporate Performance Monitoring & Research, Hinduja Group.
"Increased amount of savings was channelised to banks, mutual funds and financial markets...GDP dropping by 2 per cent is a short-term pain. In two to three years, benefits of demonetisation will witness an addition of 1.5-2 per cent of GDP," Kannan said.
Ratan Tata funded cashback, coupons and price comparison website CashKaro.com said even as there was an initial decline in transactions for first ten days of demonetisation, it started getting back to normal from December 2016.
"If we consider this year's mega Diwali sales, e- commerce as well as digital payment companies reported an increase in electronic payments. With a year gone by, demonetisation makes the future of e-commerce in India look more promising offering enormous potential and opportunities," said Swati Bhargava, Co-founder of CashKaro.
Mobikwik Co-founder Upasana Taku said India needs to embrace less-cash and become cash-less society to compete with advanced economies.
However, 90 per cent of the respondents said they prefer paying online post demonetisation.