Almost all the currency demonetised in November found its way back into the banking system, seemingly belying the contention that it would help eradicate black money. It had been thought that income tax evaders wouldn't deposit any unaccounted wealth in banks for fear of prosecution, indirectly swelling the government's coffers.
On the other hand, the cost of withdrawing the old Rs.500 and Rs.1,000 currency notes is showing up on the books of the Reserve Bank of India. Its cost of printing currency notes has more than doubled, the central bank said in its annual report for FY17 that was issued on Wednesday.
“Subject to future corrections based on verification process when completed, the estimated value of SBNs (specified bank notes) received as on June 30, 2017, is Rs.15.28 lakh crore,“ RBI said. “Till such time these notes are processed by the Reserve Bank for their numerical accuracy and authenticity, only an estimation of SBNs received back is possible.“
PM Narendra Modi last year took the historic step of demonetising two high-value currency notes with the aim of quelling black money, counterfeits and terror funding. The move led to long queues at banks and cash machines amid currency rationing as RBI struggled to print enough new notes, leading to loss of income and economic disruption.
Mukul Rohatgi, A-G at the time, had told SC in November that out of the total estimated money in circulation of Rs.15-16 lakh crore, the government expected people to deposit Rs.10-11 lakh crore in banks. “The rest, Rs.4-5 lakh crore, were being used in northeast and Jammu and Kashmir to fuel trouble in India. That will be neutralised,“ he had said.
The economists believed this would benefit the government since RBI could write off that liability of Rs.4 lakh crore and transfer the same to the government for welfare activities and to build infrastructure.
The annual report details the cost of the exercise. Expenditure on printing of notes in RBI's last fiscal, which ran from July to June, was Rs.7,950 crore, up from Rs.3,421 crore a year earlier. Supply of notes during the year at 29,043 million pieces was 37% higher than the total supply in the year before's 21,195 million pieces.
While the return of banned notes may have thrown out calculations, it has thrown up benefits such as depositor details which I-T and other departments can use to pursue evaders.