Demonetisation declared failure, 99.30% of Demonetised Money Returns To RBI

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Central Bank Report 2017-18

The central bank’s annual report of 2017-18 states that nearly all of the banned currency in India was returned to the Reserve Bank of India.

Key Highlights:

  • The processing of SBNs (Specified Bank Notes) has since been completed at all centres of the Reserve Bank. The total SBNs returned from circulation is Rs 15,310.73 billion.
  • The total value of SBNs in circulation as on Nov. 8, 2016, post verification and reconciliation, was Rs 15,417.93 billion. The total value of SBNs returned from circulation is Rs 15,310.73 billion.
  • The value of banknotes in circulation increased by 37.7 percent over the year to Rs 18,037 billion as at end-March 2018. The volume of banknotes, however, increased by 2.1 percent. In value terms, the share of Rs 500 and Rs 2,000 banknotes, which had together accounted for 72.7 percent of the total value of banknotes in circulation at end-March 2017, increased to 80.2 percent as at end-March 2018.
  • The balance under this head (miscellaneous) increased by 587.89 percent from Rs 18.74 billion as on June 30, 2017 to Rs 128.91 billion as on June 30, 2018. The increase was mainly on account of transfer of Rs 107.20 billion to ‘Other Liabilities and Provisions’ representing the value of Specified Bank Notes (SBNs) which have not been paid and were part of liability head ‘Notes issued’.

 

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The RBI report has issued warnings to the economy on the inflation and trade deficit front. While the report predicted headline inflation to face upside risks for the rest of the year, it foresaw ‘heavy impact’ on trade deficit on account of global crude oil prices.

Prime Minister Narendra Modi had announced demonetisation of all Rs. 500 and Rs. 1000 banknotes via a television announcement on 08th November 2016. The government had then claimed that this extreme and immediate implementation would curtail the shadow economy and crack down on the use of illicit and counterfeit cash to fund illegal activity and terrorism.

Just before completing a year to the demonetisation exercise, Finance Minister Arun Jaitley had said,

India has shown bold leadership… our leadership doesn’t shiver in taking decisions.

However, with the current RBI report stating nearly all money returned to the banks, it raises serious criticism on this rampant and not well thought out decision of the Modi government. As per reports in National dailies, more than 100 people had lost their lives due to the impact and harassment caused due to this unplanned and enforced exercise.

Opposition was quick to respond to the government of the day, immediately after RBI published demonetisation figures on 29th August 2018.

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