Over 99% of demonetised notes were returned: RBI

Economy       Rs 13,000 crore – the amount of currency banks did not get back after demonetisation
       
       	        Mahua Venkatesh         29 August 2018

The Reserve Bank of India's annual report comes during a week when the debate around the failure or success of demonetisation has intensified.

The Reserve Bank of India's second annual report since demonetisation puts to rest any illusions about the Modi government's grandest financial gesture.

The party said the return of nearly all the junked notes meant that the government had failed to unearth any black money, check terror financing and eradicate fake currency as promised by Modi while announcing noteban. The Wire breaks it down.

Senior Congress leader P Chidambaram slammed the government after the RBI report saying the Indian economy had suffered due to the note ban by way of job loss, closure of industries and the GDP growth.

In the annual report that was released on Wednesday, the RBI said that the processing of Rs 500 and 1,000 banknotes was complete, adding that 99.3 per cent of the notes, worth Rs 15.3 lakh crore have been returned to the banks.

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While 6,453 pieces of fake Rs 50 notes were detected in 2015-16, this number jumped to 9,222 in 2016-17 and then increased to a whopping 23,447 in 2017-18.

Asked about reports of fake notes presented to the banks post-demonetisation, Garg said a year ago in a RBI report it was said, that all the notes were verified and the amount of fake notes was "minuscule and ignorable". All the notes which have been received have been counted. "Thus, there is a 5.8 per cent, or Rs 1 lakh crore, shift in favour of small denomination currency notes", said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI. The statistics suggest that the demonetisation exercise failed to check black money, which was claimed to be one of the main aims of banning specified notes. The share of Rs. 500 notes, in terms of value, increased from 22.5% to 42.9% in the same period.

In the immediate aftermath of demonetisation, a new narrative of a "demonetisation windfall" took place. Experts say, that having a large number of Rs 2000 notes in circulation would have defeated the objective of demonetisation, which was to stop circulation of black money. It was said that this amount would be over Rs 3 lakh crore.

The demonetisation of Rs 500 and Rs 1000 notes in November 2016 had prompted the RBI to print new currency notes.

"So, government and RBI actually demonetised only Rs 13,000 crore and the country paid a huge price". For instance, parts of the Rs 10,000 crore could lie with money seized by law enforcement, cash still being held with district cooperative banks and in bank notes being held by citizens of Nepal and Bhutan. "Almost the entire amount came back, which showed that people were not hoarding money in cash".

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