Published: Thu, August 30, 2018
Finance | By Jaime Brady

Over 99 per cent of demonetised notes back with RBI

Over 99 per cent of demonetised notes back with RBI

In its annual report, the Reserve Bank of India (RBI) said the total value of notes returned by the public was 15.3 trillion rupees ($216.7 billion) or 99.3 percent of the total of 15.4 trillion rupees of notes in circulation on November 8, 2016.

The bad hangover sustained for months as businesses were hit and lakhs of people lost jobs, while 104 people died standing in long queues struggling to get their old currency exchanged or deposited.

Now, even if 100% of demonetised currency returned to the system, it does not mean all of this cash was "white" or money that was generated through wholly legal means. "After demonetization if it had grown at that rate, the currency, which is in the system today, is 87-88 per cent of that.so the Rs 3 lakh to Rs 4 lakh crore less currency is in the system today than it would have been had the old system been in place", he said in an apparent reference to the Rs. three lakh to Rs. four lakh that was claimed would be extinct. Thousands of SME units were shut down.

"That alone was a loss of Rs 2.25 lakh crore a year", he said. "Lakhs of jobs were destroyed", he tweeted.

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The annual report, curiously, also provides a glimpse of how attempts at remonetisation over the a year ago focused heavily on supplying the new Rs 500 and Rs 200 currency notes.

The Reserve Bank of India's second annual report since demonetisation puts to rest any illusions about the Modi government's grandest financial gesture. At a press conference on Wednesday evening, senior finance ministry official Subhash Chandra Garg refused to elaborate on how demonetisation helped crack down on black money. Raising doubts about the entire demonetisation exercise, Mamata asked if it was a "scheme hatched to allow some black money holders to quietly convert their black money into white".

Over Rs 2 lakh crore of black money reached banks, while around Rs 1.75 lakh crore deposited by people post-note ban was under suspicion, it had said, adding that around 18 lakh people with disproportionate income were under government scrutiny. But the goal posts kept shifting in the weeks and months since with the government citing several reasons to demonetise high value notes such as to choke terror funding, bribery, increasing tax base and checking counterfeit notes. Almost two years later, the central bank says, about 99.3% of the notes sucked out of circulation has been returned.

"...the supply of banknotes was lower [in 2017-2018] than that in the previous year, but was noticeably higher compared to the pre-demonetisation year", the annual report notes.

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