Banks are also being pushed to lend more to small and medium businesses, Modi’s core bania support base. This will increase costs of compliance, bump up default risks, because most of these businesses run on cash, have dodgy accounts and are mostly unaudited. After all, there is a reason why 45 percent of formal bank lending is concentrated among 300 large companies in India.

In any case, till 8 November, India was staring at a financial crisis. According to IMF data released May, 2016, India’s banks have the largest amount of bad debt to total lending – at 5.9 percent – among all Asian nations. That compares with China’s 1.5 percent and Korea’s 0.6 percent.

Given that, Modi’s sops threaten to make an already bad situation worse. Days before Modi’s 31 December speech, the RBI warned that bad debt could go up to as much as 10 percent of total lending. Given these risks, it is hard to see bank lending go up sharply. In any case, given the rate of printing, transporting and transmitting new currency in the system, it could take as much as three to eight more months to

get all the cash back in the system.

This is something Modi left out of his speech. He claimed demonetisation was a grand success, but forgot to say how much of the Rs 15.4 lakh crore worth of currency rendered illegal, had come back to the banking system. He had earlier claimed that hoarders of cash would rather sink their stashes in the Ganga, than deposit it

in cash.

Also Read: Did the PM Admit to the Nation That Demonetisation Has Failed?