---- Editorial ----
Is demonetisation move starting to backfire?
The worst fear may be coming true as country’s largest lender State Bank of India
(SBI) has expressed apprehensions that demonetisation may continue to result in slowing
down of the economy, and adversely affect its own business. Several experts had warned
that demonetisation might badly affect Indian economy. Government of India thrashed
all warning and claimed the whole process as game changer. The long-term impact of
this move on Indian economy and the banking sector is still uncertain. People of
India strongly supported the move of government to discontinue Rs500 and Rs1, 000
banknotes from 9 November 2016 onwards with the hope that it will help to unearth
Despite making all sort of toll claims, government has not been able to provide definite
figure of how much black money has been recovered so far. Whenever experts and opposition
parties raise this question, government beats around the bush and avoid giving direct
reply. The effects of demonetisation are uncertain, which may adversely affect the
business of India’s banking sector. It is expected that there will be increased competition
among banks due to demonetisation. Increased competition may have an adverse effect
on the net interest margin and other income and if the bank is unable to compete
successfully, its profitability may decline. With each passing months it looks like
demonetisation is starting to have negative impact on Indian economy. The time has
arrived for government do some course correction before it’s too late.
---- Readers Forum ----
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