MUMBAI: Almost all the 500 and 1,000 currency notes that were made illegal in November 2016 have returned to the banking system, the RBI said ON Wednesday, prompting the Opposition to question the efficacy of demonetisation in curbing black money.
Banks received Rs 15.31 lakh crore, or 99.3 per cent, of the Rs 15.41 lakh crore worth Rs 500 and Rs 1,000 notes in circulation on November 8, 2016, when the note ban was announced, it said.
This meant just Rs 10,720 crore of the junked currency did not return to the banking system as against initial estimates of about Rs 3 lakh crore would not return to the system as they may have been stashed away illegally to avoid tax.
However the government on Wednesday said the demonetisation of high-value currency notes achieved the objectives “quite substantially”.
Talking to reporters here, economic affairs secretary S C Garg said objectives of the note ban, like checking black money, terror financing, promoting digital transaction and weeding out fake currency notes have been achieved.
“I think demonetisation has achieved its objective quite substantially,” he said in reply to a question in this regard.
After the November 8, 2016 decision, the government gave a limited period window to first exchange any old currency in possession and then deposit them in bank accounts.
Also the junked currency was allowed to be used in utilities like for buying petrol and diesel at petrol pumps and paying for hospital and electricity bills as well as bus fare on state road transport buses.
The currency returned is a combination of deposits made in banks, notes exchanged and those used to pay utility bills.
Post-demonetisation, RBI spent Rs 7,965 crore in 2016-17 (July 2016 to June 2017) on printing new Rs 500 and Rs 2,000 and other denomination notes, and another Rs 4,912 crore in 2017-18, according to Reserve Bank of India’s annual report for 2017-18.
The printing of new currency notes reduced RBI’s profit and cut annual dividend. It transferred Rs 50,000 crore to the government in the year to June 30, 2018, as compared to Rs 30,659 crore in the 12 months.
RBI, whose accounting year runs from July to June, had spent Rs 3,421 crore on printing currency notes in 2015-16.
Former finance minister and senior Congress leader P Chidambaram was quick to pounce on the data to attack the government saying every rupee barring a small sum has come back to the RBI.
“Remember who had said that Rs 3 lakh crore will not come back and that will be a gain for the government!?,” he tweeted.
He said he suspected that the bulk of the currency not returned may be lying in Nepal and Bhutan, where Indian currency is acceptable, and some that may have been lost or destroyed.
Stating that the country paid a huge price for demonetisation, he said, “Indian economy lost 1.5 per cent of GDP in terms of growth. That alone was a loss of Rs 2.25 lakh crore a year.”
“Over 100 lives were lost. 15 crore daily wage earners lost their livelihood for several weeks. Thousands of SME units were shut down. Lakhs of jobs were destroyed,” he said in another tweet.
The government has vehemently defended the note ban decision, which sucked out 86 per cent of the currency in circulation, curbed economic activity and put common man at much inconvenience, saying the move was not intended to confiscate money but to bring it into formal channels and tax them.
The RBI, which has taken over two years to count the currency that was returned in the limited period window provided by the government to exchange or deposit the demonetised currency, said in its annual report
that the exercise is finally over.
After the note ban, old junked notes, called specified bank notes, were allowed to be deposited in banks with unusual deposits coming under income-tax scrutiny.
The “humungous task of processing and verification of specified bank notes was successfully achieved,” it said.
The SBNs received were verified, counted and processed in the sophisticated high speed currency verification and processing system for accuracy and genuineness and then shredded, it added.
The RBI said the processing of SBNs has since been completed. “The total SBNs returned from circulation is Rs 15,310.73 billion.”
A collateral damage as a result of the rise in printing and other cost was dividend RBI pays to the government.
The government replaced old Rs 500 notes with new ones, but no replacement for Rs 1,000 notes has been made. Instead, a new Rs 2,000 notes were introduced post note ban.
The demonetisation was hailed as a step that would curb black money, corruption and check counterfeit currency but RBI said, “Counterfeit notes detected in SBNs decreased by 59.7 and 59.6 per cent in the denominations of Rs 500 and Rs 1,000, respectively.”
“Compared to the previous year, there was an increase of 35 per cent in counterfeit notes detected in the denomination of Rs 100, while there was a noticeable increase of 154.3 per cent in counterfeit notes detected in the denomination of Rs 50,” the RBI said adding that counterfeit notes detected in the new Rs 500 and Rs 2,000 notes during 2017-18 were 9,892 and 17,929 as against 199 and 638, respectively, during the previous year.