RBI on Demonetisation: Of total value of demonetised notes on November 8, 2016, currency equivalent to 99.3% has been returned

The Reserve Bank of India, in its 2017-18 Annual Report, has revealed that the process of verification and processing of bank notes that were returned post being demonetised has been completed, and has given official figures regarding the same.

VALUE OF DEMONETISED CURRENCY RETURNED:

In its annual report, India's central bank states that the total value of the demonetised currency, namely the old Rs 1000 and Rs 500 notes, on the day of demonetisation's announcement, i.e. November 8, was Rs. 15,417.93 billion (Rs. 15,417,930,000,000), while the total value of the notes, referred to as SBNs or Scheduled Banknotes, that have been returned from circulation is Rs. 15,310.73 billion. This means that 99.3% of the total value of demonetised currency that was in circulation at the time of demonetisation, has been returned, via various mechanisms, to the RBI.

The annual report also elucidates its process for returned demonetised currency: 

The SBNs received were verified, counted and processed in the sophisticated high-speed CVPS for accuracy and genuineness and shredded and briquetted in the Shredding and Briquetting system. The processing capacity was augmented by resorting to night shifts (along with day shifts), working for 6 days a week, using 8 additional machines available with commercial banks and taking 7 machines on lease from vendors.

The report proceeds to reveal that the notes issued by the RBI increased by 26.93% between June 30, 2017, and June 30, 2018, to Rs 19,119.6 billion, "on account of continued efforts to supply adequate quantity of banknotes to meet the transactional needs of the public."

Read: India's Q1 (June-August) 2018-19 GDP estimated to have grown at 8.2% -- an all-time high for Modi government - Republic World

ON SEIZED AND CONFISCATED CURRENCY:

"With regards to currency that was seized or confiscated by law enforcement agencies or produced before a court on or before December 30, 2016, the report says that it "may be tendered at any office of the Bank for deposit in a bank account or exchange of the value thereof with legal tender", implying that such confiscated and seized currency may also be a part of the Rs 15,310.73 billion that has been returned to the RBI."

Other points of note regarding demonetisation:

• During the year, 27.7 billion pieces of banknotes were disposed as against 12.5 billion pieces the previous year, mainly due to the accelerated processing of the demonetised currency
• As of March 2018, there were 3.36 million Rs 2000 notes in circulation, comprising 37.3% of the total value of currency in circulation.
• As of March 2018, there were 15,569 million Rs 500 notes in circulation, comprising 42.9% of the total value of currency in circulation. 

• Accordingly, the value of banknotes in circulation increased by 37.7 per cent over the year to Rs. 18,037 billion as of end-March 2018. The volume of banknotes, however, increased by 2.1%, the RBI said.

In its section regarding currency management during the year, the RBI writes: 

"The focus of currency management during 2017-18 broadly remained on remonetisation, processing and reconciliation of SBNs received at the Reserve Bank from circulation. This humungous task of processing and verification of SBNs was successfully achieved with the co-ordinated efforts put in by the work force of the Issue Department of the Reserve Bank. The process involved working in two shifts under strenuous conditions, maintaining detailed records and planning effectively without compromising on other functions of currency management. Ceaseless efforts towards remonetisation continued during the year which saw issuance of banknotes of  Rs 10. and Rs 50. under the new series and introduction of Rs. 200, a new denomination."

CONGRESS ATTACKS MODI GOVERNMENT ON 99.3% FIGURE

The release of the report, and, in particular, the revelation that 99.3% of the currency was returned to the RBI, has led the Congress party to attack the Modi government, despite there being no demarcation regarding seized and confiscated currency, and remonetised currency. 

Randeep Surjewala tweeted:

Former Finance Minister P Chidambaram wrote:

"Every rupee of the Rs 15.42 lakh crore (barring a small sum of Ra 13,000 crore) has come back to the RBI. Remember who had said that Rs 3 lakh crore will not come back and that will be a gain for the government!?

I suspect that the bulk of the Rs 13,000 crore is currency in Nepal and Bhutan and some that was lost or destroyed. So, government and RBI actually demonetised only Rs 13,000 crore and the country paid a huge price.

Over 100 lives were lost. 15 crore daily wage earners lost their livelihood for several weeks. Thousands of SME units were shut down. Lakhs of jobs were destroyed. Indian economy lost 1.5 per cent of GDP in terms of growth. That alone was a loss of Rs 2.25 lakh crore a year."

DEMONETISATION AND ITS POLITICAL & ECONOMIC EFFECT:

Demonetisation had been announced by the Prime Minister in a surprise move on the evening of November 8, 2016, with the stated goal of cracking down on black money that was being hoarded outside of the monetary system, and which was also being used to fuel terrorism and militants in Jammu and Kashmir. The announcement was followed by a mammoth exercise where people deposited their invalidated notes in bank accounts or in exchange for newly issued notes. The move was met with significant political opposition, with the likes of Mamata Banerjee protesting immediately, while the Congress party took longer to adopt a position. 

The Samajwadi Party-Congress combine made demonetisation and related hardships their major poll plank for the critical Uttar Pradesh assembly elections, but it appeared to not have caught on as the BJP stormed to power in the state. In terms of the nation's economy, however, the twin effects of Demonetisation and the GST reform that was subsequently rolled out, led to a drop in GDP growth rate, which lasted almost a year. Recent figures, however, have shown the downturn to only be transient, as India has once again become the world's fastest-growing major economy, and has surpassed France to become the sixth-largest economy in the world.