Demonetisation: 99% of banned notes returned by depositors, says RBI

The Reserve Bank of India RBI ) on Wednesday said that all but 1.4 per cent of the old Rs 1,000 notes have come back into the banking system post demonetisation . The central bank released the data in its annual report for the financial year 2016-17.The report said that out of 632.6 crore pieces of Rs 1,000 currency notes in circulation, 623.7 crore have been returned, post the note ban last November.Some of the initial questions that arose from the data were whether the percentage of black money in the system was indeed this minuscule and if not, then did hoarders figure out a way to push it back into the system.However, Finance Minister Arun Jaitley brushed aside these speculations in a press conference. "People with inadequate understanding of how to tackle black money linked note ban with money returned to system," he said.Listing the motives of demonetisation, Jaitley said, "Objective of note ban was to bring down cash in economy, bring digitisation, expand tax base and fight black money."Analysts also said that it will be an ill-informed approach to comment upon the success or failure of demonetisation based on the amount of money returned.Economists said the positive impact of the note ban included bringing in cash into the banking system, and thus lowering the cost of loans, even as significant parts of the economy were disrupted."While this shows that demonetisation exercise has not yielded a large one time gain, it has led to financialisation of dormant savings and helped bring down lending rates," said A. Prasanna, economist at ICICI Securities Primary Dealership Ltd in Mumbai.The RBI report also stated that 7.62 lakh pieces of counterfeit currency notes detected in 2016-17 as against 6.32 lakh in 2015-16.The government had earlier said that money trails generated as a result of demonetisation has resulted in identification of 2 lakh shell companies. It also claimed that the addition of 56 lakh new tax payers was a result of demonetisation which led to better compliance and better tax revenues."Money has now been identified with its owner," Jaitley warned.The RBI said that in order to meet the shortage of currency after note ban , it pumped in 2,380 crore pieces of bank notes into circulation worth Rs 5.54 lakh crore between the period of November 9 and December 31, 2016.In terms of value, the share of Rs 500 and above banknotes stood at 73.4 per cent at end of March 2017, as against 86.4 per cent a year ago, according to the report. It also added that the cost incurred by RBI in printing notes has doubled to Rs 7,965 crore in the financial year 2016-17 from Rs 3,421 crore in 2015-16. The central bank said that the surge in cost is on account of printing of new currency notes post demonetisation.There were as many 588.2 crore of Rs 500 notes, both old and new in circulation as of March 31, 2017. A year ago, there were 1,570.7 crore Rs 500 notes in circulation.The share of the newly introduced Rs 2,000 notes was reported to be 50.2 per cent of all notes in circulation at end of March 2017.