How I Illegally Convert Old Notes Into New: An Insider Explains

“Most bank managers of private banks were converting old notes into new on commission,” a money broker tells all.

(Photo: The Quint/Harsh Sahani)

The Quint spoke to a businessman who has earned crores by switching to a new profession post demonetisation – ‘converting’ old notes to new ones for a commission.

The businessman – let’s call him Happy Singh – agreed to share details of this racket on condition of anonymity. This is a video reconstruction featuring an employee of The Quint as Singh, recounting what he told us.

Singh said that the commission had ranged between 10%-50% at different junctures after the note ban. Shockingly, he also claimed that all banks – including the entire staff at bank branches – were involved in the scam.

Here’s the transcript of our reporter’s conversation with Singh.

Reporter: Aap kab se yeh paise convert kar rahe hain? Kitna convert kar diya hai?
(For how long have you been ‘converting’ money? How much money have you converted?)

Singh: Jis din se demonetisation hua hai, tab se purane note badal raha hoon. Karodon rupey badal diye hain haath ke haath. Ek haath liya aur 2-3 ghante baad doosrey haath diya. Maine aaj tak paise apne paas nahi rakhein hain ji.
(I started doing it right after demonetisation was announced. I have converted crores of rupees so far, and I do it in just two-three hours. I make sure not to keep any of the money on me.)

Reporter: Aap shuru se bataiye.
(Start right from the beginning.)

Singh: Shuruat mein mere paas 13 ladke rakhe thay. Main 500 rupey deta tha per sadey chaar hazaar badalwane ke liye, line mein khada hone ke liye. Phir wo bhi akalmand ho gaye. Wo kehte, Sardar ji, humari dihadi badao. Phir maine unhe 20% tak diye, aur khud 10% rakhta. Aise karke mein 30% over the counter bahut change karwaye. Kitne karwaye wo toh ab yaad bhi nahin.
(At first, I had 13 boys who were paid Rs 500 to stand in queue at banks to deposit Rs 4,500. But later, they got smart and started asking for more money to queue up. After that, I started paying them 20% and kept 10% for myself. In this way, I got a lot of money changed over the counter for 30% commission. I don’t even remember how much money I laundered.)

‘All Private Banks Involved in Scam’

Singh told us that most private banks are involved in converting old notes for a commission. The bank managers, who mastermind these rackets, work behind the scenes.

Reporter: Aap bank managers ke touch mein kaise aaye?
(How did you get in touch with bank managers?)

Singh: Saare private banks yeh kaam kar rahe hain. Aur poora bank staff yeh kaam kar raha hai. Bank manager ne apney staff ko bataya, usne apne rishtedar ko bataya, usne phir apne dost ko bataya... Toh aise hi toh chain banta gaya. Issi tarah 10 bank managers ke aadmi mere contact mein aa gaye. Managers kabhi saamne nahi aate thay, sirf apne aadmi ko bhejte.

(All the private banks are doing this. And the entire bank staff is involved. A bank manager tells an employee about the racket, the employee tell his relative, the relative tells his friends – that’s how the chain is formed. This is how I came into contact with 10 bank managers’ aides. The managers never get in touch with us, they deal with us through a third person.)

Reporter: Lekin yeh bank purane notes ka documentation kaisey karenge? Kis khaatey mein jama dikhayenge?
(How will the banks account for the old notes? )

Singh: Oji, abhi documentation kar kaun raha hai? Sab paise badalne mein busy hain. Ek bank manager ka aadmi hi mujhe bata raha tha ki bogus account khol kar paise deposit dikha rahe hain. Kaun check karta hai itna? RBI mein itna staff hai nahi.
(Nobody is doing any documentation right now. Everybody is busy converting money. A bank manager’s accomplice told me they are opening bogus accounts to show the deposits. Who is going to check? The RBI doesn’t have enough employees to do it.)

‘As Everyone Was Changing Money, Commission Fell From 40% to 10%’

Immediately after demonetisation, Singh told us that those holding black money panicked. They started desperately looking for ways to launder their stash. Also, the supply of new notes was barely a trickle. So, touts, ‘money brokers’ and bank managers demanded high rates of commissions, ranging from 30%-40%. But when the supply of new notes picked up, the commission charged dropped to as low as 10%.

Reporter: Commission ka percentage 40 se 10 kaise aa gaya? (Why did the rate of commission drop from 40% to 10%?)

Singh: Market mein naye note bahut aa gaye na ji. Jis kisi ke paas bhi kuch lakh rupey hote thay, wo change karna shuru kar diya. Phir saare bank managers isi kaam mein lag gaye. Change karne wale zyaada. lekin change karne wale kam! (laughs)
(The market got flooded with new notes. Anybody who had a few lakh rupees started changing money. And then all the bank managers also got involved. Now, the number of people willing to convert notes is less than those who need to get their cash changed!)

‘After RBI’s One-Time Deposit Diktat, Commission Spiked to 50%’

A recent diktat of the government mandating one-time deposits of old notes worth over Rs 5,000 – which was later revoked – once again boosted the commission rate. It shot up to 40%-50%, until the order was later reversed.

Singh also told us that to protect himself from law enforcers, he never kept the notes on him. He always converted the money in batches of Rs 5 lakh, that too immediately.

From 17 December, the government introduced a new scheme for declaring undisclosed income. Under it, those who declare black money will have to pay 50% tax. The declarant will keep 25% of the amount. The remaining 25% will go into the Pradhan Mantri Garib Kalyan Deposit and will be returned after five years without interest.

Also Read: 7 Ways in Which Black Money Hoarders Got Their Cash Into Banks

But Singh explained to us how people are easily converting their black money in old notes into new ones by paying as little as 10%. Once the black money has been turned into new notes, it can be accounted for using various means, such as overbilling.

And so it seems that with middlemen like Singh and corrupt bank staffers around, PM Modi’s surgical strike on black money has been weakened considerably.

Video Editor: Mohd Irshad Alam