Black money was the main reason given by the government for demonetising high value notes. The estimates showed the amount of black money is around ₹ 3 lakh crore to ₹ 5 lakh crore. This figure was not anticipated to be deposited in the banks. But the cash deposited in bank so far and the future projections have another story to convey. It might bring a shock to the government as the black money expected to be purged much less.
The Minister of State for Finance, Arjun Ram Meghwal in a reply in Rajya Sabha on Tuesday, said that there were 17,165 million pieces of ₹ 500 notes and 6,858 million pieces of ₹ 1,000 notes in flow on the day PM Modi declared the demonetization of the two high value notes. Thus, the sum of high denomination notes circulating in the system on that day was – ₹ 15.44 lakh crore.
As per a report in India Today, on November 28th, the RBI declared that ₹ 8.45 lakh crore (₹ 8,44,962 crore) in the scrapped notes had been deposited in the banks between Nov 10 and Nov 27. Notably, this amount was deposited in just 18 days, out of the 50 days allowed to the customers to do so.
Besides, all commercial banks in India are required to maintain a share of their deposits with the RBI. It is known as the cash reserve ratio (CRR) and used by the RBI to manage liquidity in the system. On Nov 8, the total sum of actual cash with the RBI as CRR was ₹ 4.06 lakh crore (₹ 4,06,900 crore), as per the weekly bulletin of the central bank.
Moreover, the banks also keep money to manage daily affair and demands of the customers. As per the RBI, the regular cash-to-deposit ratio of banks in India is 4.69. If four percentage points from this goes as CRR to RBI – amounting to ₹ 4.06 lakh crore (on Nov 8, say) – the cash with banks would average around ₹ 70,000 crore.
This would indeed comprise all denominations.
Therefore, if we take the cash deposited in 20 days and add the Nov 8 CRR – it will amount to ₹ 12.50 lakh crore. If a share of the cash-in-hand on Nov 8 would be added, say ₹ 50,000 crore, the total sum of money in old notes is ₹ 13 lakh crore.
There are still 29 days left to deposit scrapped currencies.
Considering the speed at which the money is being deposited, there are chances that ₹ 2 lakh crore or more would come into the banking system till December end. Apparently, it would be a direct jolt on government’s strategy to tackle black money. It can be said that the black money is either not in high value notes or already have been put into the banking system.