RBI slows remonetisation rate as govt cracks down on black money depositors
The amount of cash in circulation began increasing from January, amounting to Rs 13.35 lakh crore at the end of March as printing of new Rs 500 and Rs 2,000 notes picked up speed. But the remonetisation rate is slowing down now, and analysts expect the process to be completed by May.business Updated: Jun 14, 2017 18:59 IST
Even as the government cracks down black money hoarders exposed by the recent demonetisation move, the pace of new currency notes coming into circulation has slackened considerably. It is expected to flatten by the end of April.
The extent of both demonetisation and remonetisation can be gauged by the currency in circulation, which fell sharply from Rs 17.98 lakh crore just before the controversial move to Rs 8.98 lakh crore by January 6, 2017.
Prime Minister Narendra Modi had scrapped Rs 500 and Rs 1,000 notes in a surprise decision on November 8, 2016, making thousands queue up in front of banks and ATMs over the next two months.
The amount of cash in circulation began increasing from January, amounting to Rs 13.35 lakh crore at the end of March as printing of new Rs 500 and Rs 2,000 notes picked up speed. But the remonetisation rate is slowing down now, and analysts expect the process to be completed by May.
The increase in currency being circulated was 5.9% week-on-week in January 13. It slowed to 4.6% in February 10, and further to 4% on March 10.
Latest Reserve Bank of India data shows that the currency in circulation increased by 1.7% week-on-week to Rs 13.35 lakh crore as on March 31, 2017. Analysts say the RBI need not print the entire amount of “extinguished” currency, given the excess cash in banks and the shift towards digital transactions.
The budgetary announcement of capping cash transactions at Rs 2 lakh may also necessitate less cash in the economy.
“We believe RBI should only print Rs 1.15 lakh crore more from March 24 levels. And, going by the average pace of printing, the process could be completed by the first fortnight of April,” State Bank of India chief economic advisor Soumya Kanti Ghosh wrote in a recent note.
Meanwhile, government agencies have begun cracking down on black money hoarders who deposited obsolete cash in banks without considering future implications during the demonetisation drive in November-December 2016.
Finance minister Arun Jaitley said in Parliament that authorities have detected 18 lakh cases of people whose income and bank account profiles don’t match. Preliminary information has been sought from such people, and many have responded. Those who have not given out details would be issued notices as per procedure, he added.
In keeping with its electoral promise of cracking down on unaccounted cash and corruption, the Narendra Modi administration has unearthed tax evasion money amounting to Rs 1.37 lakh crore in the last three years. The finance ministry said the money was recovered through 23,064 searches and surveys by government agencies.