Demonetisation: Rs 14 lakh crore returns to banks; govt officials term scheme a success

A report in The Indian Express citing a government official has said that as much as Rs 14 lakh crore worth of old Rs 500 and Rs 1,000 currency notes have returned into bank accounts, an indication that the notes that got extinguished was much lower than expected. The government was expecting that about Rs 3 lakh crore will not return to the banking fold, thus resulting in reduction of RBI’s liability to that extent. If, as the government official has told the news paper, Rs 14 lakh crore has returned, that means only about Rs 75,000 crore would have been extinguished, says the report. [caption id=“attachment_3127858” align=“alignleft” width=“380”]  Representational image. PTI[/caption] On 8 November, 2016, when Prime Minister Narendra Modi announced the demonetisation of Rs 500 and Rs 1,000 notes, the system had Rs 17.4 lakh crore worth currency in circulation. Of this, Rs 15.4 lakh crore was demonetised. The new figure of Rs 14 lakh crore has come at a time when there have been reports that almost all of the demonetised currency or Rs 15 lakh crore may have already returned to the system. The RBI has not released data on demonetisation deposits yet. An RTI query filed by Firstpost has not yielded any results yet. The central bank, which has come under criticism for keeping many data and other information related to demonetisation secret, has said that it is still reconciling the data and the information will be revealed at the earliest. However, the IE report, citing another official, says that with just 60 machines to sort fake currency in its possession, the RBI might even take 600 days to complete the task. The government may even rope in other banks to do the sorting, the report says. Meanwhile, a report in The Economic Times says that in 40 days of demonetisation, as many as 2.10 crore new accounts have been opened and Rs 3 lakh crore worth currency deposited. The data was sourced from the Financial Intelligence Unit and studied by the government, say the officials cited in the report. They also claimed that the fact that much of the demonetised currency has returned to the system means the whole exercise was a success and not a failure. “The amount of money that has come back wouldn’t have come back even in the next five years," an official has been quoted as saying in the ET report. The comment has to be read in the context of criticism that the return of more than 90 percent currency is a proof that the demonetisation was a failure as this means black money holders have managed to launder their ill-gotten wealth. The government has denied all such theories saying the exercise created a new normal where black money holding has become risky due to the strict surveillance by the state. However, the question remains if this was the aim of the whole exercise, why it could not have been done through an amnesty which would have spared the innocent common man.