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Demonetisation: Govt keeps data on fake notes received by banks a secret

Dealing a blow to counterfeit currency was one of the three objectives outlined by Prime Minister Narendra Modi when he announced the decision to scrap Rs 500 and Rs 1000 banknotes on November 8.

black money crackdown Updated: Nov 24, 2016 00:36 IST
A supporter of West Bengal chief minister Mamata Banerjee holds a placard, protesting against demonetisation in New Delhi.
A supporter of West Bengal chief minister Mamata Banerjee holds a placard, protesting against demonetisation in New Delhi.(AFP)

Dealing a blow to counterfeit currency was one of the three objectives outlined by Prime Minister Narendra Modi when he announced the decision to scrap Rs 500 and Rs 1000 banknotes on November 8.

Two weeks later, over Rs 6 lakh crore of the scrapped currency notes are back in the banks. But how many of these are counterfeits?

The government won’t say. It is a secret.

A top finance ministry official said the statistics could not be made public due to security reasons. He didn’t explain what would happen if people got to know how many of the scrapped banknotes were counterfeit.

A senior official of a public sector bank said this was one figure the banks had been told to keep under wraps.

The Reserve Bank of India (RBI) and the National Crime Records Bureau (NCRB) annually declare the total number of counterfeit currency notes detected by banks as well as law enforcement agencies. In 2015, police seized fake Rs 500 and Rs 1000 banknotes of the face value of Rs 32.7 crore.

The RBI didn’t ask for information on fake currency notes on November 8. Initially, it only asked banks to make sure that they took the precautions to detect counterfeit notes.

But the realisation that it was missing a unique opportunity dawned soon enough.

Three days later, the RBI asked banks for daily reports on counterfeit currency detected by them. The information had to be sent by 11pm, every day.

The government has on several occasions shared information on the cash collected by the banks after its November 8 decision to discontinue Rs 500 and Rs 1,000 banknotes.

A goldmine of data

Just like for black money, governments and the RBI have struggled for years to estimate the extent of fake banknotes pumped in from across the border.

Security agencies claim that Pakistan not only prints fake currency to fund cross-border terror but also to destabilise the Indian economy.

Lack of information is such that when someone misinterpreted data in a 1998 RBI report concluding that the total fake currency was Rs 1,69,000 crore, many did not question the figure. It later turned out that the figure was the total money in circulation in India, not fake currency.

But, the problem of fake currency is real.

A 2014 finance ministry-commissioned study by the Indian Statistical Institute estimated that the face value of fake currency in India was about Rs 400 crore. It added that counterfeit currency had remained a constant in the past four years.

A senior police officer said the government might want to keep the figure a secret as the number of counterfeit notes detected by the banks won’t match public perception.

Between November 10 and November 18, banks received Rs 5,44,571 crore in deposits from people. That is nearly half of the Rs 10-11 lakh crore that the Centre, according to its submissions in the Supreme Court, expects to get back in the banking system. The remaining Rs 5-6 lakh crores is presumably.