Pain before gain for banks after demonetisation

The shock move to abolish high-value banknotes was expected to deliver a windfall to lenders, and banks have indeed seen coffers swell after people deposited Rs 12.4 trillion ($183 billion) in cash into the system.

But while banks may benefit in the longer term, so-called "demonetisation" has hit them hard in the immediate aftermath, with demand for credit plummeting and additional costs incurred to make the transition.  Stock Market Astrology Tips



Prime Minister Narendra Modi's decision to remove Rs 500 and Rs 1,000 notes to funnel illicit cash into the formal financial sector has led to a severe cash shortage as the central bank has replaced barely a third of the higher-value notes that had been in circulation.    Intraday Trading Tips



That has hit business confidence and dented demand for loans, hurting banks that were already battling the weakest loan growth in nearly two decades.

Not that they have resources to process loans anyway. 


"Our top priority is to provide relief to our customers, while lending could wait for some time," said Vaibhav Anand, who manages a branch of state-run Bank of India in Parliament Street, near PM Modi's office in New Delhi.

For a sector that has long struggled with low profitability and sour loans currently totalling $136 billion, even a temporary hit is painful.  Nifty Trading Tips