Adding that it has “no information” whether demonetisation is being planned to be implemented at regular intervals, the Reserve Bank of India (RBI) told a parliamentary panel that it has “no information” on how much black money has been extinguished as a result of demonetisation of Rs 500 and Rs 1,000 notes.
The central bank also stated that an estimated Rs 15,280 crore in demonetised notes has come back “subject to future corrections based on verification process”, as quoted by Moneycontrol.com.
The notes that were demonetised on November 8, 2016, or the specified bank notes (SBNs), were worth Rs 15.45 lakh crore. This was the majority of the overall Rs 17.97 lakh crore that was in circulation during that period – meaning, 86% of India’s currency was rendered valueless overnight on November 8.
“Till such time, these notes are processed by the RBI, their numerical accuracy and authenticity, only in estimation of SBNs received back is possible. Subject to future correction, based on verification process when completed, the estimated value of SBNs received as on June 30 is Rs 15.28 trillion,” the RBI said in its written reply to the panel.
Prime Minister Narendra Modi, in his speech on November 8, said that the move was to curb black money, counterfeit currency and terror funding.
However, in the chaotic weeks following the announcement, with mounting deaths and outrage over poor handling by the government, the rhetoric was abruptly shifted to focus on digitisation of the economy and increasing the tax base.
The RBI was widely criticised for not disclosing information on how much black money demonetisation was able to neutralise.
Last week, it released its annual report which seemed to vindicate a lot of demonetisation’s criticisms. The RBI annual report revealed, among other things, that almost all of the demonetised currency has found its way back to the central bank. The report also concludes that only 0.0007% of Rs 1,000 notes and 0.002% of old Rs 500 notes were found to be fake. (Overview of the RBI’s report can be read here.)
Verification of old notes still ongoing, bank says
The central baid the verification for authenticity and numerical accuracy of the demonetised currency are still on. Some of the old notes are reportedly still lying in currency chests.
The central bank also informed the parliamentary panel that the completion of the process of verification will take time in view of the large volume involved.
The process is “going on in full swing” with most RBI offices working in double shifts and with the help of high-end verification machines, the central bank said.
PM says amount of black money is over Rs 2 lakh crore; RBI & Finance Ministry disagree
In his Independence Day speech, Prime Minister Narendra Modi said the following about black/unaccounted money being unearthed after demonetisation: “Rs 3 lakh crore that had never come into the banking system before has been brought into the system after demonetisation. More than Rs 1.75 lakh crore deposited in the banks is under the scanner. Black money worth Rs. 2 lakh crore had to be deposited in the banks and this system has forced them to be accountable.”
But PM Modi’s claims on black money are contrary to the statements made by the Finance Ministry on as many as four occasions (explained below) in the past – the latest one being on August 1, only a month ago.
On all these occasions, the Finance Ministry told Parliament that it had no record of the amount of black money in India. (More here)
As such, the fact that the Prime Minister suddenly knows the amount of black money brought back by demonetisation indicates that the government has come to a conclusion regarding the extent of black money in India. Or it might also mean that PM Modi was merely stating estimates. Either way, there is a need for the government to state clearly and conclusively its progress in probing black money in India.