99.3% of demonetised currency returned to banks: RBI

Dwayne Harmon
August 30, 2018

PM Modi had scrapped Rs 500 and Rs 1,000 notes in a surprise announcement on November 8, 2016.

He referred to the annual report of the RBI previous year which said at that time that most of the notes were counted but the process was not complete.

The central bank said that it was estimated that Rs 15.41 lakh crore worth Rs 500 and Rs 1,000 notes were in circulation on November 8, 2016, of which Rs 15.31 lakh crore have been returned.

The government had introduced Rs 500 and Rs 2000 notes after demonetisation, which absorbed 85 per cent of the old currency notes from the economy.

The new Rs 2,000 note - which was initially believed to have come printed with better security measures - was also not immune to counterfeit. The thinking behind this theory was that if a certain amount of the demonetised currency didn't come back into the system - if it was dumped in a river or burnt to ashes because its owners were afraid of being caught with black money - it would reduce the RBI's liabilities.

Even after two years of demonetisation, the Reserve Bank of India (RBI) on Wednesday said that Rs 10,720 crore of the junked currency has not yet been received by the banks.

"I suspect that the bulk of the Rs 13,000 crore is in Nepal and Bhutan and some that was lost or destroyed".

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Former finance minister P Chidambaram claimed that more than 100 lives were lost and lakhs of jobs were destroyed due to closure of businesses after demonetisation. It was said that this amount would be over Rs 3 lakh crore.

"The notes issued increased by 26.93 per cent from Rs 15,063.31 billion as on June 30, 2017 to Rs 19,119.60 billion as on June 30, 2018", the report said.

The RBI said that the "humungous task of processing and verification of specified bank notes was successfully achieved and the total specified banknotes returned from circulation is Rs. 15,310.73 billion". Currency notes of higher value are easier to hoard, and can be used to proliferate black money. It was supposed to flush out black money and end corruption.

The overall notes in circulation added up to Rs 18.03 lakh crore as on March 2018, displaying a growth of 9.9 per cent over March 2016.

"... India's currency to GDP ratio moved up to 10.9 per cent in 2017- 18, returning to being amongst the highest levels of currency usage in peer emerging market economies (EMEs) and advanced economies (AEs) as well". The government, while announcing demonetisation, had also cited checking counterfeit notes as one of the reasons.

"There are some small notes which are stuck in the whole process, which can come back". However, the supply of banknotes was lower than the previous year.

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