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More Money In Less Space

Every day hoards of new currency are being seized across the country and Goa is no exception. The law enforcing authorities have seized around Rs 3 crore mostly in new currency in different parts of the state. The seizures make a prima facie case that black money hoarding continues despite demonetization.  There is every possibility of numberless others who succeeded in laundering their money in bulk and escaped the attention of the authorities. That some people have got new currency notes in lakhs and crores indicates that there was a nexus operating between the bank officials and cash hoarders. On the other hand, common people suffer for want of cash. The RBI has given over Rs 1,000 crore in new currency to the state but ordinary Goans are still forced to make a beeline in banks and at ATMs.

Everywhere in the country it is the same story. The permissible limit for withdrawal from one’s own account is Rs 24,000 per week.  From the cash seizures it appears that the withdrawal limit is only for common people and not for the cash hoarders or those selling new notes for commission. Those who have been caught with large amounts of cash in new currency include middlemen, politicians, officers, jewellers and other businessmen.  How did they manage to get huge amounts of cash from banks? Scores of bank officials, including an official of the Reserve Bank of India, have been caught for colluding with black money hoarders. The main reason why bank officials colluded with them was a hefty commission or bribe. The exchange of old currency with new currency acquired a premium, with the commission being offered by holders of old currency in bulk up to 50 per cent. The jewellers and middlemen got active in the exchange for the same reason. They thought it was an occasion to make a good killing.

The seizures obviously make the tip of the iceberg. The scale of exchange must be elephantine.  That means that much of the black money in old currency has already got into the system. The government had announced demonetisation with a presumption that there was at least Rs 4 lakh crore to Rs 5 lakh crore (out of the Rs 14.50 lakh crore demonetized) that was being held by black money hoarders and that would not come back into the system.  Most of the demonetised money has returned to the banks. If most of the money is returned into the banking system, the government’s decision on demonetisation looks meaningless. It not only looks meaningless but also cruel and callous to the common people as they had to bear the brunt of the cash shortage.

Though more than a month has passed since new currency was introduced there is no let-up in the miseries of common people who continue to wait in long queues to get money at the banks and ATMs.  The deadline of December end set by the government to streamline the process is approaching fast. Most of the ATMs continue to run out of cash after few hours. It is necessary to find out whether they are loaded to their capacities or whether they are also subjected to cash rationing as is being done at the bank counters. Since there are complaints of banks or the agencies tasked with the replenishment of cash conniving with influential people and diverting cash, the authorities need to probe what amount of cash was loaded into them and whether the allegations against the agencies had substance. It is never too late to put the system back in order. Public welfare being the utmost concern for the government it is necessary that immediate steps are taken to end the miseries of the common people who have been suffering and to take stringent action against those involved in laundering huge amounts of cash at the cost of the common people.

The elephantine scale of money laundering on the one hand and the sufferings of the common people on the other make a picture that is not very pleasing for the Modi government that decided on demonetization of the 500- and 1000-rupee notes. There are two things that can be clearly seen from the experience of the past five weeks. One, demonetization has failed to stop black money hoarding. Some persons might have been caught, several crores in new currency might have been seized, but such arrests and seizures were done by Income Tax officials even before demonetization. I-T officials could have made such arrests and seizures even without demonetization.  The second thing that is clear is that black money hoarding has become more convenient with the Rs 2,000 note as more money can be stored in less space.

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