People & Startups

The Great Indian Surgical Strike of Demonetization and its impact on the Startup Community.


The Startup Mojo is a community which unveils the learning of the startup world to empower the budding entrepreneurs. We sincerely intend to build a network for entrepreneurs, thereby helping them to cross leverage their skills and resources to overcome their early challenges.

While we were sleeping in the midnight hour, Narendra Modi and his team launched a surgical strike against corruption and black money by demonetising 500 and 1000 currency notes. The Thought Leadership and Intellectuals are contemplating, what it could bring? But this time certainly NAMO and his team have nailed the first nail in the coffin of Black Money and Corruption in India.  In the words of the first PM Shri Jawahar Lal Nehru, “India awakens to life and freedom at the stroke of the midnight hour”.  He has ascertained a 50 day corruption free plan to make the Indian Economy cleaner this time.

While we praise and feel rejuvenated & united by Government’s Political Will to curb Corruption and Black Money in India, it is important to also assess that as Business owners and Entrepreneurs what impact would it have to our lives in particular?

Being an Entrepreneur and Small Business Owner doesn’t change your domestic routine.

You would buy groceries, fuel, general merchant items and FMCG goods in cash like other families do and you, and your family will be impacted nearly in the same manner as the common man is going to be impacted. So start your planning of exchanging the OHD (Old High Denominations) as per the prescribed procedure in the nearest bank or the post office. Don’t rush and panic as there is ample amount of time to exchanges the OHDs. Also the Government has made some exceptions as stated below.

The Electronic Payments and Non cash FinTech Startups are going to encash this Lifetime Opportunity!

Fintech organisations especially facilitating e-payments and mobile wallets like Paytm, Freecharge, Citruspay, Mobikwik, Razorpay are witnessing surge in the demand of their services.

What would matter now is the on-boarding of the new entrants (as consumers) who are not familiar with this technology, as they will try to onboard and use these services for the first time. Offline strategies will help them as they would need handholding and education to use the services, as the first time users of the services. Also payment banks which are mobile wallets like like Paytm will have an upper hand than any other Fintech companies in the current scenario.

The Great Indian Surgical Strike of Demonetization and its impact on the Startup Community 3

The Great Indian Surgical Strike of Demonetization and its impact on the Startup Community 3

Paytm has crossed 50 million downloads and currently has 150 million mobile wallet users. It has also hit 5 billion GMV and is currently clocking INR 120 crores worth deal daily. Due to Demonetization there is surge in the app downloads and Senior VP- Paytm, Kiran Vasireddy said “During this period, the transaction value continued to be 200 per cent of the average ticket size while the number of app downloads went up 300 per cent. The number of transactions per user also went up from 3 transactions to over 18 transactions in a week. I am very excited to announce that Indian consumers are now using Paytm in more scenarios than ever before. Owing to the overwhelming response from consumers and merchants alike, we have set bolder targets in merchant acquisition, and are aiming to target 5 million merchants by the end of the financial year.” Paytm  is also trying to encapsulate this opportunity and is giving Hindi ads in National Dailies to reach the wider audience in PAN India.

Paytm  has come up with “Paytm App POS”.  All the merchant needs to do is logon to Paytm app as Merchant and completes the process by clicking the Accept Payment App on their mobile. The point of difference is that in the Card Swiping Machine the merchant wouldn’t have to punch in the entire card numbers (only has to punch in the last 4 digits) however here he would have to punch in the card numbers or for that matter would ask the customer to do it.

Currently India has 750 Mn Debit/Credit cards and against that there are only 1.4 Mn POS Terminals. Hence there is a huge opportunity for the Fintech to plunge in into this market gap which is widened due to the Demonetisation of INR 500 and 1000 notes.

Also recently RBI has increased the limit on the Digital Wallets from INR 10,000 to INR 20,000 and also have waived off all the service transaction fee from Cards, MobileWallets and Digital Payments.

Payment Banks and Demonetisation

What are Payment Banks?

Payments banks are a new model of banks conceptualised by the Reserve Bank of India (RBI). These banks can accept a restricted deposit which is currently limited to INR 1 lakh per customer account. These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks.

Recently Airtel debuts with the first payment bank in Rajasthan, India. They have already crossed 1 lakh consumers in their mover and are going to launch their services in Andhra Pradesh and Telangana. The move is performed to pilot and test the operational efficiency of the system before launching the same in PAN India.

E Commerce Sector is also in the Queue

Recently with the change crunch Snapdeal offered Wallet on Demand services which claimed to bring in around 1 lakh orders. Read More.  The E commerce sector will see some dip in GMV due to issues related to change availability with the consumers. However eventually they will have more users turning online to buy goods which they are unable to buy in cash from their local store.

The beginning of the Era of Cryptocurrency in India

People who have been under the impression that physical currency shall remain prevalent till eternity will have to change their point of view or else would have to bear losses. India will now move towards the era of digital payments and soon the currency of high denominations will be replaced by digital currency. This change shall take time to happen but it has surely started!

Post Demonetisation the growing cryptocurreny Bitcoin parters with PayUMoney Wallet in India

Bitcoin service provider Unocoin has tied up with digital payment gateway and solutions provider PayU Money enable Unocoin users to buy Bitcoin using the PayUmoney Wallet. With this arrangement, users can avail more alternatives apart from the standard NEFT/IMPS/RTGS transfers.

Unorganised Sectors are going to face the brunt of this surgical strike of OHDs (Old High Denominations)

Indian Economy sectors which are organised such as Banking, Insurance etc will get a huge boost from such curbing measures while some of the highly unorganised sectors like Retail, Real Estate, Gold etc will be negatively impacted from such measure. Startups like Caratlane and Bluestone will also see surge in the demands.  This entire bunch of activities which are naturally generated out of this surgical strike shall bring deflation in the market which may persist in the near 6 months to 1 year.

The Great Indian Surgical Strike of Demonetization and its impact on the Startup Community 2

The Great Indian Surgical Strike of Demonetization and its impact on the Startup Community 2

What is this Scheme?

In the words of ET “The legal tender character of the notes in denominations of Rs 500 and Rs1000 stands withdrawn. In consequence thereof withdrawn old high denomination (OHD) notes cannot be used for transacting business and/or store of value for future usage. The OHD notes can be exchanged for value at any of the 19 offices of the Reserve Bank of India or at any of the bank branches or at any Head Post Office or Sub-Post Office.”

The Scheme closes on 30 Dec, 2016 and you would have to visit the branches of commercial banks, Regional Rural Banks, Urban Cooperative banks, State Cooperative Banks and RBI to exchange the notes.

The Great Indian Surgical Strike of Demonetization and its impact on the Startup Community 4

The Great Indian Surgical Strike of Demonetization and its impact on the Startup Community 4

Withdraws from ATM and Banks

With the Demonetisation crisis the ATM’s were closed for couple of days and post they were functional you could withdraw from upto a maximum of Rs.2,000/- per card per day upto 18th November, 2016. The limit was raised to Rs.4000/- per day per card from 19th November 2016 onwards. However with the surge in the people withdrawing money it is now restricted to INR 2000 per day from any ATM for savings account and INR 2500 per day from any ATM for Current Account. The weekly limit of the amount that can be withdrawn from your savings bank account is been raised to INR 24000 from INR 20000 & the weekly limit for Current Bank Account has now been raised to INR 50000.

Withdraws from Cheques:

The facility of cheque in the banks will be subjected up to a maximum ceiling of Rs10,000/- in a day within an overall limit of Rs.20,000/- in a week (including withdrawals from ATMs) for the first fortnight i.e. upto 24th November 2016 for Savings Account. Post 24th Nov the limit has been raised to INR 24000 per savings account. For current account the amount that can be withdrawn as cash (through ATM and Cheque) is INR 50000 per week.

For People who are travelling to outside India or visiting India during this time

You have to write an authority letter stating the request and the cause and thereby authorising any other person residing in India to deposit the OHD (Old High Denomination) notes on your behalf to banks and post offices.

In case if you are visiting India or in India at the moment you can purchase the foreign exchange currency at Airport exchange counters and you would have to present a proof of purchasing the OHD notes.

Outlets which are exempted from this till Dec15, 2016

Government Hospitals, Government dispensaries, train and airline tickets, Government Bus Stops, Petrol Diesel and CNG Stations run by public sector companies, milk booth, crematoriums, monuments maintained by the Archaeological Survey of India and  foreign tourists & international travellers.

Over the Counter Old Notes suspended from Nov 25, 2016

No more exchange defunct currency from Nov 25 as stated in the notification by RBI. Government of India has extended the facility of using old Rs 500 notes in public utilities till 15th December, 2016 and included more services like mobile recharge but stopped the over-the-counter exchange of defunct currencies at the bank. The Government has also given relaxation to the transport sector by waiving off the toll charges for tolls which come under NHAI till 2nd Dec, 2016 post which till 15th Dec, 2016 old 500 notes shall be used to pay the toll taxes.

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