Contrary to earli-er belief, it was the government which had ‘advised’ the Reserve Bank of India (RBI) to demonetise Rs500 and Rs1,000 notes on November 7 and the board of the central bank the very next day recommended the demonetisation.
In a report to Parliament’s department-related committee of finance, the RBI stated that the government had on November 7 last year “advised the RBI that to mitigate the triple problems of counterfeiting, terrorist financing and black money, the board of the RBI may consider withdrawal of the legal tender status of the notes in high denominations of Rs500 and Rs1,000.”
The RBI’s board met the very next day to ‘consider the government’s advice’ and after deliberations decided to ‘recommend to the federal government that the legal tender status of the banknotes be withdrawn’.
The federal cabinet headed by Prime Minister Narendra Modi met within hours of the recommendation on November 8 and banned the circulation of Rs500 and Rs1000 notes. Some ministers have thus far maintained that the government had only acted on RBI recommendation of demonetisation. In the report to the panel, the RBI said it had been in the last few years working on introduction of new series of banknotes with improved security features to secure them against counterfeiting. In parallel, the government had been taking steps to curb black money and combat terrorism.
“There were reports by intelligence and enforcement agencies that availability of high denomination banknotes made it easier for black money hoarders and counterfeited notes in high denominations were being used for terrorist financing,” the RBI said.
Separately, while the RBI is still reconciling the quantum of demonetised currency that has been returned to banks by the December 30, 2016 deadline, Niti Aayog member Bibek Debroy feels about 10 per cent of such notes won’t return to the system. “Even now, Rs1.6 trillion is what will be missing at the end of it all. Those are the figures. If I take a base of roughly rounding off demonetised currency around Rs16 trillion, 10 per cent of it is about Rs1.6 trillion,” Debroy said in an interview.
“Figures say that still Rs1.5 trillion that has not come back. There is still a gap. People have made estimates that may be 10 per cent will not come back,” he added.
Some reports have said about 97 per cent of the demonetised currency notes worth Rs14.97 trillion have been deposited back as on December 30. The government had earlier estimated that about Rs15.4 trillion of the notes – or 86 per cent of cash in circulation – will be taken out of the system.
Meanwhile, the central bank has cast doubts on its own estimates. “The periodical SBN (specified bank notes) figures released by us were based on aggregation of accounting entries done at the large number of currency chests all over the country,” it said. The last figure released by the RBI was that deposits of Rs12.44 trillion have been received till December 10, 2016.