Banks won’t get nearly 30% of black money: SBI
Even though the Narendra Modi government has demonetised the currency notes of ₹500 and ₹1,000, about 25-30% of the black money may not be injected into the formal banking system.business Updated: Nov 11, 2016 13:36 IST
Even though the Narendra Modi government has demonetised the currency notes of ₹500 and ₹1,000, about 25-30% of the black money may not be injected into the formal banking system.
Why? Because people hoarding unaccounted wealth may be deterred from depositing the “entire” amount, fearing action by the Income Tax department. Government demonetised the notes to fight black money, fake currency and terror funds.
According to a State Bank of India (SBI) research, currency notes of ₹500 and ₹1,000 at the end of March 2016 accounted for 24.4% of the total currency denomination volume, but 86.4% transactions were being done through these high-value currency notes.
The study said in the demonetisation exercise in 1978, 25% of the unaccounted wealth did not return to the system.
“The unaccounted money that is not coming back will reduce the currency liability of the Reserve Bank of India and hence the asset size should also get reduced proportionally. This will open up a fiscal windfall for the government that can be used for need-based funding, the report said.
The total value of high denomination notes comprising ₹500 and ₹1,000 in circulation was ₹14,180 billion in March 2016.
The government has maintained that those depositing large amounts of cash will come under the scrutiny of the taxman.
“We would get the reports of all cash deposited from 10 November to 30 December above the threshold of ₹2.5 lakh in every account .... The department will match these with the income returns of the depositors. And suitable action may follow,” Hasmukh Adhia, revenue secretary said.
The government also introduced the Income Disclosure Scheme this year earlier -- a one-time opportunity to those with black money to come clean. A sum of ₹65,250 crore worth unaccounted money was disclosed during this four-month window and the government will get around ₹30,000 crore in tax.