The Reserve Bank of India on Wednesday said that nearly 99 per cent of scrapped Rs 500 and Rs 1000 notes returned to the system after demonetisation last year. In its annual report for 2016-17 which was published today, the central bank said Rs 15.28 lakh crore of the Rs 15.44 lakh crore scrapped notes were deposited to the banks after demonetisation was announced on November 8 last year.
The RBI, which has so far shied away from disclosing the actual number of junked currency deposited after November 8 last year, said that Rs 15.28 lakh crore of the junked currency had come back into the banking system, leaving only Rs 16,050 crore out. As on November 8, 2016 there were 1,716.5 crore pieces of Rs 500 and 685.8 crore pieces of Rs 1,000 in circulation, totalling Rs 15.44 lakh crore.
"Subject to future corrections based on verification process when completed, the estimated value of Specified Bank Notes or SBNs (demonetised Rs 500 and Rs 1000 notes) received as on June 30, 2017 is Rs 15.28 trillion," the RBI said in its report.
The RBI said that out of 632.6 crore pieces of Rs 1,000 currency notes in circulation, 8.9 crore have not been returned post the note ban last November.
The Reserve Bank spent Rs 7,965 crore in 2016-17 on printing new Rs 500 and Rs 2,000 and other denomination notes, more than double the Rs 3,421 crore spent in the previous year.
Prime Minister Narendra Modi on November 8 last year had announced the decision to demonetise the Rs 500 and Rs 1,000 notes, nearly 86.4 per cent of the total currency in circulation at the time. The old notes were allowed to be deposited in banks, with unusual deposits coming under income tax scrutiny. The move had lead to immediate shortage of currency in the system leading to long queues at banks and ATMs all over the country.
The government soon launched a new series of Rs 500 notes and new Rs 2000 notes, but no replacement for Rs 1000 notes has been made.
Besides fighting black money, the government said the move would curb corruption and check counterfeit currency but RBI said just 7.1 pieces of Rs 500 note per million in circulation and 19.1 pieces of Rs 1,000 notes per million in circulation were found to be fake in its sample survey.
Highlights of RBI annual report 2016-17
RBI said its income for 2016-17 decreased by 23.56 per cent while expenditure jumped 107.84 per cent. "The year ended with an overall surplus of Rs 306.59 billion as against Rs 658.76 billion in the previous year, representing a decline of 53.46 per cent."
According to the RBI, there are as many 588.2 crore of Rs 500 notes, both old and new in circulation as of March 31, 2017. As of March 31, 2016, there were 1,570.7 crore Rs 500 notes in circulation.
As many as 328.5 crore pieces of new Rs 2,000 notes were in circulation as on March 31, 2017. Besides new Rs 500 and Rs 2,000 notes, the RBI has circulated new Rs 200 notes last week.
Former RBI deputy governor R Gandhi is of the view that demonetisation will have a long-term impact, saying expectations of various quarters that sizeable portion of the demonetised currency will not return have not been fulfilled.
While stating that Rs 15.28 lakh crore have already come back, the RBI said the government has allowed District Central Cooperative Banks (DCCBs) to deposit the scrapped notes accepted by them from their customers during November 10-14.
Also, the RBI is in discussions with the government on acceptance or otherwise of those notes held by citizens and financial institutions in Nepal.
The report further said that during 2016-17, the number of suspicious transaction reports filed by banks and other financial intermediaries with the Financial Intelligence Unit "witnessed a quantum jump".
Banks, financial institutions and intermediaries reported as many as 4.73 lakh suspicious transactions in 2016-17 compared to about 1.06 lakh in the previous year.
The trail of deposits of the scrapped notes into bank accounts may provide valuable information to the revenue authorities in tracing unaccounted money, it added.
Opposition launches attack on Centre after RBI disclosure
Opposition was quick to seize on the RBI data to attack the government with former finance minister P Chidambaram asking if demonetisation was a scheme designed to convert black money into white.
"RBI 'gained' Rs 16000 crore, but 'lost' Rs 21000 crore in printing new notes! The economists deserve Nobel Prize," he said in a tweet.
"Rs 16,000 cr out of demonetised notes of Rs 15,44,000 cr did not come back to RBI. That is 1 per cent. Shame on RBI which 'recommended' demonetisation," he tweeted.
Congress chief spokesperson Randeep Surjewala demanded an apology from Prime Minister Narendra Modi saying demonetisation not only dented institutional sanctity of the RBI but also India's credibility abroad.
Samajwadi Party leader Naresh Agarwal said his party would move a privilege motion against RBI Governor Urjit Patel for misleading a parliamentary panel on the issue.
CPI(M) general secretary Sitaram Yechury said India can "never forgive" the Modi government for the "anti- national act", which allegedly hit the country's economy.
West Bengal Chief Minister Mamata Banerjee alleged that the RBI report "points to a big scam".
"Is not the RBI's revelation this evening on demonetisation pointing to a big scam?" Banerjee wrote on her Facebook page tonight.
Govt in defence mode, says demonetisation was not done to confiscate money
Finance minister Arun Jaitley defended the government saying the demonetisation exercise last year was not an exercise to confiscate money.
“The objective of note ban was to bring down cash in the economy, bring digitization, expand tax base, and fight black money,” the finance minister said at a press conference following the RBI’s annual report. “The note ban was not an exercise to confiscate money."
(With PTI inputs)