Demonetisation: Deposits have passed Rs 13 lakh crore; govt suspects double counting

By: | Updated: December 16, 2016 10:44 AM

In the next 10-15 days, 50% of the banknotes whose legal tender character was withdrawn on November 8 will have been (replenished),” economic affairs secretary Shaktikanta Das said

Shaktikanta Das claimed that new R500 and R2,000 notes, with solely indigenous design, were more immune to counterfeiting. (Reuters)Shaktikanta Das claimed that new R500 and R2,000 notes, with solely indigenous design, were more immune to counterfeiting. (Reuters)

In the next 10-15 days, 50% of the banknotes whose legal tender character was withdrawn on November 8 will have been (replenished),” economic affairs secretary Shaktikanta Das said on Thursday, adding that notes of value corresponding to the entire banned currency might not need to be put into the system, as the Reserve Bank of India (RBI) would have a plan of action in this regard. Although the stress on digital payments has slightly reduced the currency required to meet the demand, 95% of the personal consumption expenditure in the country is still cash-based; so it is clear that the cash crunch can’t be addressed fully even one month from now, let alone within the fast-approaching 50-days-from-demonetisation deadline set by the government.

Attorney general Mukul Rohatgi told the Supreme Court on Thursday that total deposits in banks since November 8 have crossed R13 lakh crore (till March 2016, the value of the old R500 and R1,000 notes in circulation was R14.2 lakh crore). While this questioned the utility of the demonetisation process (only a tiny fraction of the banknotes in question is being extinguished), Das said the government and RBI were verifying whether “double counting” inflated the deposit figure. Cross-checking and reconciliation would bring more clarity in this regard, the official added.

On reports of seizure of illegal accumulation of new currencies — especially R2,000 notes — from many parts of the country, Das said due enforcement action was being taken in such cases based on analysis of specific inputs from Financial Intelligence Unit and the tax department’s own data. “We are taking pointed and focused action,” he said. Banks have been asked to further tighten their internal vigilance mechanism.

Separately, chairing the fifth meeting of the Consultative Committee attached to his ministry, finance minister Arun Jaitley said the government and RBI were taking measures to bring down the digital transaction cost with an aim to move towards a less-cash economy. Digital transactions, he said, were a parallel mechanism, not a substitute, for cash transactions and “cashless economy is actually a less-cash economy as no economy can be fully cashless”. The government, the minister added, was trying to encourage digitisation as much as possible because “an excessive cash economy has its own social and economic costs and consequences”.

According to Das, while new high-value notes — R2,000 and R500 — are being printed on a war footing at the RBI’s and government’s three printing presses, the thrust of late has been on producing more R500 notes, which would also mobilise the (hoarded) R2,000 notes with people. At the same, lower-denomination notes are being printed at a brisk pace in separate machines — R100 notes worth R80,000 crore have been newly printed since November 8, adding to such notes of R1.6 lakh crore that were already in circulation. “The situation is constantly improving,” Das said of the demonetisation pains, but admitted that reports continued to pour in from many pockets of problems.
Over 2,300 crore discrete currency notes ceased to be legal tender on November 8, and although the capacity of the country’s currency printing presses is seen to be 300 crore pieces a month, the government has managed to print at a faster pace, but production still falls far below the demand in the economy. Das claimed that new R500 and R2,000 notes, with solely indigenous design, were more immune to counterfeiting.

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