|No JanDhan payoffs please|
|Monday, 26 December 2016 01:03|
Transferring black-money gains to the poor a bad idea
Though it is not clear how much black money will not come back to the banking system after demonetization, or how much black money the government will get by way of taxes in IDS-2, it would do well not to try and give this back to the poor via their JanDhan accounts. That may look good symbolically, especially in the context of all the talk about getting black money and using it to benefit the poor. There are various reasons for why the JanDhan transfers are a bad idea, the primary one is that the banking system urgently needs the cash to recapitalize if it is to be able to lend at a fast pace, more so in the context of its rapidly rising NPAs and doubtful loans –data from Credit Suisse shows that while the gross NPAs plus restructured loans of banks rose from 6.8% of all loans in FY11 to 11.5% in FY16 and 12.4% in Q2FY17, this is more likely to be around 16.5% once the unrecognized stressed loans are taken into account.
Equally important, as the rapid jump in funds in the JanDhan accounts – from Rs 45,300 crore on November 2 to Rs 74,300 crore on November 30 – showed, the accounts are being misused in a very big way. Worse, given the hurry in which the accounts were opened after the prime minister decided all poor households would have a bank account to which subsidies would be transferred, and the slow progress in confirming the identity of account holders, there is no proof that the account holders are genuinely poor people. Between November 2 and November 30, for instance, over 33 lakh new JanDhan bank accounts were opened – what is not clear is whether these accounts belonged to the poor and whether the Rs 29,000 crore that flowed into JanDhan accounts after the demonetization were to these accounts or the ones that were already opened. While an investigation by the authorities will make that clear, what needs to be kept in mind is that just 55% of these accounts have been seeded with Aadhaar numbers – it is not clear whether the Aadhaar de-duplication software has been run to ensure that there is no possibility of multiple accounts in the same person’s name. As for the balance 45% of the accounts, until the seeding is complete, there is no question of being able to run any checks – what is also required is to correlate these accounts with the lists of the poor that have been identified in the SECC census across various states. If the government decides against giving its demonetization gains to the banks, spending this money in programmes like MGNREGA or public works in poor areas is a better idea.