With less than four weeks to go for the December 30 deadline for depositing the withdrawn high-denomination currency, a State Bank of India research report estimates that about Rs.13 lakh crore of the Rs.15.4 lakh crore of such notes in circulation will return to banks, leaving at least Rs.2.5 lakh crore outside the system.
The Centre’s surprise November 8 decision to withdraw legal tender status to Rs.1,000 and old Rs.500 notes as a step aimed at striking at the circulation of ‘counterfeits’ and ‘black money’ has triggered much speculation on exactly how much money is likely to return to banks – a parameter that may determine the relative success of the demonetisation.
The government, in an affidavit submitted to the Supreme Court last month, had projected that about Rs.10 lakh crore was expected to come back into the banking system.
In a written statement to Parliament, Minister of State for Finance Arjun Ram Mehgwal had submitted that 17,165 million pieces of Rs.500 notes and 6,858 million of Rs.1,000 notes were in circulation as on November 8. That meant the combined value of the withdrawn notes was Rs.15.44 lakh crore.
The Reseve Bank of India on November 28 reported that old notes deposited (including exchange) in banks as on November 27 amounted to Rs.8.45 lakh crore. That figure, however, did not include a figure for the amount of withdrawn notes deposited at post offices across the country.
SBI — the country’s largest lender that controls about 17 per cent of the deposit market and has been publishing daily data on deposits of the old notes received by it — has said Rs.2.31 lakh crore had been deposited at its branches till December 3.
“If we closely look at the data, the daily working day average deposited/exchanged at banks has declined significantly from Rs.60,500 crore (Nov. 10-18) to Rs.50,100 crore (Nov. 19-27), i.e. a decline of 17 per cent,” Group Chief Economic Adviser Soumya Kanti Ghosh wrote in the report. Based on the daily average trends, which show a decline, the report estimates that Rs.9.8 lakh crore would have returned to the banking system by November 30.
All banks have been directed by the RBI to furnish information on old notes received in a particular form which the bank branches need to fill up and share with the regulator on a daily basis. The forms need to have have details like the name of branch, and the code for branch – known as Indian Financial System Code (IFSC) in banking parlance.
Referring to the Centre’s latest income declaration scheme, the report projected that of the Rs.2.5 lakh crore that may fail to return before the December 30 deadline, about Rs.1 lakh crore would likely be disclosed under the self declaration of the undisclosed income scheme and would attract a tax of 50 per cent.
“We conservatively assume that Rs 1.5 lakh crore will not be disclosed by the individuals and this will purely be a extinguished currency liability,” the report said.
The “immediate short term benefit to the Government will be Rs.50,000 crore,” the report added.