UPDATE: 99% of demonetized currency returned to govt

Eight months on, the Reserve Bank of India is yet to finish verifying and counting the 500- and 1000-rupee notes surrendered by the public between Nov 8 and Dec 30, 2016, the finance ministry said in a statement on Aug 11.

UPDATE: About ten days after this article was published on Aug 17, the government released final numbers that showed that about 99% of the total notes were returned under demonetisation.

A total of around 2,300 cr currency notes are estimated to have been returned by the public in the fifty-day period under a scheme designed to flush out illicit funds or ‘black money’ last year.

The sudden move caught people with undeclared income surprise, but also caused inconvenience to the regular public, who were forced to exchange their old notes for new ones of 500- and 2,000-rupee denominations.

Out of the 16 lakh cr of money subjected to the exercises, it was expected that a substantial chunk may never be tendered in banks or may be detected to be illicit funds.

However, rough estimates based on total money in circulation suggested that nearly all of the money in circulation was submitted for exchange.

The Reserve Bank of India is yet to reveal exactly how many notes were returned and how much of the money was detected to be counterfeit or ‘black’.

“Presently counting of the specified bank notes (surrendered by the public) is in progress and no definite timelines have been provided by RBI,” the finance ministry said in a statement on Aug 11.

No number can be given without making sure that all fake notes and tallying errors are accounted for, and the RBI does not have enough machines to do so quickly as of now.

“Steps have been taken to augment machine processing capacity,” the ministry said.

“Two Tender have been floated; one for leasing of Currency Verification and Processing Systems (CVPS) to augment the pace of verification and authentication of SBNs.¬†Another Tender has been floated for procurement of 50 new CVPS machines which is also likely to aid in the process subject to deliveries,” it added.

The machines will be used to remove any reporting errors and verify the authenticity and quantum of the old notes, it added.

Demonetization had led to sharp criticism from the opposition parties, who alleged that the move would not be effective in forcing people to declare untaxed income, and was an expensive exercise in futility.

Opposition parties also expected people to ‘be angry with’ the Narendra Modi government for forcing them to queue up outside banks and ATMs to exchange their notes.

However, surprisingly, the demonetization move was received as a welcome intervention by the government to crack down on corruption and tax evasion in the country. The BJP did surprisingly well in elections to local bodies and state legislative assemblies after the crackdown.

The move also led to the growth of electronic payment methods in India, such as e-wallets, UPI and plastic cards.