Currency Ban: Vast Deposits Made in Sept; Did Some People Know?

Some political leaders have said that a section of population had some inkling of the impending demonetisation move. (Photo: Reuters)

After months of marginal month-on-month change in deposits, there was a sudden surge in deposits at scheduled commercial banks between 16 September and 30 September.

Reserve Bank of India (RBI) data reviewed by The Quint shows an addition of Rs 3,55,570 crore or Rs 3,555.7 billion in the system in this fortnight alone.

The surge was preceded by a slight drop in deposits in the first half of September.

It Doesn’t Add Up

• Sudden surge of Rs. 3,55,570 crore in banks in the second half of September.
  
• Government attributes the surge to the pay out of pay commission arrears
  
• Arrears totalled Rs. 35,000 crore.
  
• In most months of this fiscal, aggregate deposits have seen marginal change.
  

The surge occurred just a few days before the government’s move to announce withdrawal of Rs 500 and Rs 1,000 notes from the system, prompting some political leaders to say that a section of the population had some inkling of the impending demonetisation move.

Delhi chief minister Arvind Kejriwal has gone on record saying that such sharp jump in deposits show that some people knew about the announcement.

He has been demanding a rollback of the demonetisation move, terming it as a scam and not a “surgical strike” on black money.

The government, however, attributes this surge to the release of arrears of the seventh pay commission.

(Photo: RBI Website)

The Union Finance Minister is reported to have said that the sudden spike was primarily because of the pay out of arrears to central government employees. Arrears pay out totalled nearly Rs 35,000 crore and the amount was paid to nearly 1 crore government employees and pensioners with the salary for the month of August.

Economists say a combination of several factors – accumulation of cash ahead of the festive season and the pay out of fertiliser subsidy – could have contributed to the upward spike.

However, they also argue that despite taking those factors into account, such a surge is not ordinary.

Data shows that aggregate deposits in the banking system stood at nearly Rs 96,000 billion at the beginning of the current financial year.

It started inching up, albeit marginally, from July onwards. The first marginal drop was observed in the fortnight ending 19 August. The first fortnight of September was another such period of marginal blip.

RBI data also shows that deposits have been steady at Rs 99,633.98 billion and Rs. 99,839 billion respectively in the two fortnights in October.

A recent report by CNBC-TV 18 showed public sector banks like State Bank of India, Punjab National Bank and Bank of India post robust quarter-on-quarter growth in deposits in the quarter ending September.

SBI’s deposits grew 4.3 percent

As compared to 1-3 percent in previous quarters, the report said. A similar spurt was reported by other banks.

The report says “this coincidence of deposits growing for all banks and the fact that India is staring at a demonetisation of notes gives rise to a suspicion.”

Several questions can be raised: did some people know about it before-hand and therefore could push their hoarded money into deposits? The synchronous rise in deposit growth at a time when the economy was not doing well as the index of industrial production (IIP) shows is suspicious.