The dubious jump of Rs 21,000 crore in Jan Dhan Yojana accounts in just two weeks post the demonetisation points to multiple possibilities--the dark side of the loose Know Your Client (KYC) rules that were used to open these accounts and the vulnerability of poor for exploitation by smart crooks who could have used these accounts to make part of their ill-gotten wealth legit, may be paying a commission to the account holder. Remember, some of these are accounts where, at one point, bankers had to put Re 1 coin from their own pockets to technically erase zero balance status. How did these bank accounts, supposedly held by the unbanked poor, suddenly turn cash-rich needs to be investigated in detail.
Senior bankers and economists do not rule out the possibility of misuse of these bank accounts by hoarders of black money. These are bank accounts originally opened for the unbanked poor under Prime Minister Narendra Modi’s flagship scheme to promote financial inclusion in the country. “How can such a sudden surge happen in these accounts?. (There is a possibility that) people would have done some trickery, which needs to be investigated,” said Jayanta Sinha, former chief general manager - rural banking, State Bank of India.
Now, take a closer look at what happened in these accounts since PM Modi announced the demonetisation exercise.
The accumulation of Rs 21,000 crore in 14 days would mean that Jan Dhan deposits have increased by half of its outstanding (about Rs 45,600 crore as on 9 November) during this period. Now the outstanding is over Rs 66,000 crore. As this Indian Express report points out, going by these estimates, the average weekly deposits in these accounts has increased by 3,200 percent in the two weeks since 9 November.
As against this, between 31 March and 9 November, the weekly deposit average was just Rs 311 crore, which increased to Rs 10,500 crore in the past two weeks. The maximum amount in this chunk has come from West Bengal, according to the above reports.
In other words, it would have taken about a year for banks to get the amount of deposits in Jan Dhan accounts that came in the past fortnight. What are the possibilities here? Of course, one could argue that the poor housewife would have mobilised all her cash savings thus far saved in small bins in her kitchen to the newly opened Jan Dhan accounts.
“Such deposits would have constituted a portion of the total amount that has come in. But, the other part raises questions,” said Maddan Sabnavis, chief economist at Care Ratings.
Someone who holds black money in cash could have used these Jan Dhan accounts to make his money legit by splitting the amount to several small bundles.
Why should he do that and expose himself to the taxmen? Of course, he would do so only after running out of all other options like hiding this money into other illegal avenues. In such a scenario, putting this money into the Jan Dhan accounts then makes immense sense because the only other option is to dump the money in the sewage.
From the very beginning, there have been questions on the high-speed implementation of PM Modi’s flagship scheme even from the RBI, with concerns emerging on the nature of loose KYC and chances of misuse. To be sure, ministers and bureaucrats in the Modi government itself had raised concerns on the likely misuse of Jan Dhan accounts and warned of serious action if caught channeling ill-gotten wealth into these accounts.
Post demonetisation, the finance ministry had issued warnings against using others' accounts to hoard cash and said that those allowing his or her account to be misused would face prosecution. "It is hereby clarified that such tax evasion activities can be made subject to income tax and penalty if it is established that the amount deposited in the account was not of the account holder but of somebody else," the ministry had said.
Sensing the danger, the government had put an upper limit of Rs 50,000 to deposit cash in these accounts. There are also restrictions to withdraw money from these accounts. But, it isn’t very difficult for the evaders to find a way around. They can easily rent several Jan Dhan accounts for this purpose and deposit money in small installments without really violating the rules. The banker at the branch will also be happy to connive with such crooks to get some activity in these accounts and show fresh deposits to his superior officer.
As of now, it is difficult to pinpoint the extent of misuse that has occurred in Jan Dhan accounts post the demonetisation. But, there are surely reasons to believe that these accounts have been misused by black money holders. There is something fishy that needs to be probed.