While the data from an RBI report may seem to be giving arsenal to the demonetisation naysayers that the unprecedented exercise was rendered useless with 99% of the currency notes returning into the system, at least two eminent bankers have pointed out to the gains that might accrue from the information made available.
Kotak Mahindra Bank CEO Uday Kotak said that demonetisation must not be viewed as a single act, but rather as a philosophy. Prime Minister Narendra Modi’s surprise move to demonetise Rs 1,000- and Rs 500-currency notes in one fell swoop with an objective to capture black money has given a much cleaner economy and has left money trails, Uday Kotak said at an event organised by ET Now.
Uday Kotak was not the only banker supporting demonetisation. His views found favour with JP Morgan India CEO Kalpana Morparia, who also said demonetisation has given a lot of data to the government to work on. At the ET Now event, she also said that the rapidity of digitisation would not have happened without demonetisation.
Earlier today, the Reserve Bank of India’s annual report revealed that Rs 15.28 lakh crore, or 99% of the Rs 15.44 lakh crore scrapped notes had come back to the central bank till June 30 this year. It revealed that out of 632.6 crore pieces of Rs 1,000 currency notes in circulation, 8.9 crores did not return post the note ban last November. This means that only 1.4% of the old Rs 1000 notes have not come back. Coming to Rs 500 notes, there were as many 588.2 crores 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.
The report further mentioned that 7.62 lakh pieces of counterfeit currency notes were detected in FY’17 as against 6.32 lakh in FY’16. What came as a major setback for the government is that the cost of printing notes doubled to Rs 7,965 cr in the financial year 2016-17 from Rs 3,421 cr in the previous fiscal 2015-16 on account of new currency printing post note ban.
However, there are benefits being seen in terms of expansion of the tax base and additional tax collections, both in the direct taxes and the indirect taxes. The income tax department and other investigative agencies are in the process of scanning and taking action on the basis of information coming from the data on Rs 500 and Rs 1,000 deposited during demonetisation.