Nearly all of demonetised currency came back; 99.3% returned, says RBI

30 August, 2018, 09:34 | Author: Lora Ball
  • Government banks are estimated to hold 90% of the total non-performing assets in India’s banking sector

RBI has informed that the Specified Bank Notes Processing has been completed at all centers of the Reserve Bank.

The Congress leader feared that at the end of this exercise, the government may have more than 100 pc of the currency that was demonetised, as the RBI is yet to take into account currency notes in Nepal and Bhutan besides the money blocked in court cases.

The currency recall exercise in November 2016 has had positive impact and government has achieved its objective "quite substantially", even as an RBI report outlined that 99.3 percent of junked notes came back to banks.

"That alone was a loss of Rs 2.25 lakh crore a year", he said.

"The very big task of processing and verification of Specified Bank Notes (SBNs) was successfully achieved", RBI said.

While the actual estimate of fake Indian notes in circulation (FICN) has been hotly debated, the central bank's annual report implies that demonetisation may not have done much to curb the generation of new fake currency.

Of the Rs 15.41 lakh crore worth Rs 500 and Rs 1,000 notes in circulation on November 8, 2016, when the note ban was announced, notes worth Rs 15.31 lakh crore have been returned. "Almost the entire amount came back, which showed that people were not hoarding money in cash". According to the RBI data, 522,783 pieces of counterfeit notes were detected in the banking system in 2017-18. However, small number of notes are still with law enforcement agencies.

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Collateral damage as a result of the rise in printing the notes and other cost was dividend RBI pays to the government.

The share of newly-introduced ₹200 notes in the total value of banknotes in circulation was 2.1 per cent as at end-March 2018. It is a natural process as the GDP grows, payment system grows, currency grows.

Digital transactions have grown, but the RBI found the value of banknotes in circulation had also increased in the past year by 37.7%. There was, however, a 2.1% increase in the volume of banknotes.

"... 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 annual report, curiously, also provides a glimpse of how attempts at remonetisation over the previous year focused heavily on supplying the new Rs 500 and Rs 200 currency notes.

Asked about reports of fake notes presented to the banks post-demonetisation, Garg said past year in a RBI report it was said, that all the notes were verified and the amount of fake notes was "minuscule and ignorable".

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