RBI’s latest report is clinching evidence that demonetisation was a failure

Randal Sanchez
August 30, 2018

West Bengal chief minister Mamata Banerjee said her apprehensions about the impact of demonetisation on the Indian economy had been held true by RBI report. The report also states that the total value of money returned was Rs 15.3 lakh crore against Rs 15.4 lakh crore that was in circulation on Nov 8, 2016. Almost two years later, the central bank says, about 99.3% of the notes sucked out of circulation has been returned.

The RBI said that the total value of the demonetised currency returned to the banks now stands at Rs 15.3 lakh crore.

Demonetisation was supposed to be the tonic that cured the financial system of a range of maladies, the government argued. "My first question now is - where has the black money gone?" she remarked.

The Reserve Bank of India finally revealed the quantum of notes that have returned into the system post the Demonetization. Meanwhile, the country's banks reportedly detected a 480% jump in suspicious transactions post demonetisation.

The Reserve Bank of India in its annual report has said Rs 15.31 lakh crore out of the total Rs 15.41 lakh crore demonetised currency have returned to the banking system.

"This gigantic task of processing and verification of SBNs (specified bank notes) was successfully achieved with the coordinated efforts put in by the work force of the Issue Department of the Reserve Bank", said the report.

The RBI said the processing of SBNs has since been completed.

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Sen also mentioned the use of black money, he said that trade and money lending are the commonest ones.

According to official data given by the RBI, the value of banknotes in circulation has increased by 37.7% over the year to ₹18,037 lakh crore as at end-March 2018.

While The Wire has over the last eighteen months reported and analysed how India's currency-in-circulation (CiC) and currency-to-GDP ratio has not changed drastically after demonetisation, the RBI's annual report provides further proof of how little things have changed.

The bad hangover sustained for months as businesses were hit and lakhs of people lost jobs, while 104 people died standing in long queues struggling to get their old currency exchanged or deposited.

Thousands of SME units were shut down, lakhs of jobs were destroyed and the Indian economy lost 1.5% of GDP in terms of growth, Chidambaram said in another tweet.

Criticising the demonetisation exercise, former Finance Minister P Chidambaram said: "Every rupee of the Rs 15.42 lakh crore has come back to the RBI".

The government replaced old Rs 500 notes with new ones, but no replacement for Rs 1,000 notes have been made.

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