99.3% Of Demonetised Currency Returns to RBI: Central Bank Report

Nearly all of the banned currency in India during demonetisation was returned to the Reserve Bank of India.

Almost all of the demonetised currency notes have been counted and accounted for by the Reserve Bank of India (RBI), the central bank said in its annual report for the year 2017-18 on Wednesday, 29 August.

According to the report, Rs 15.31 lakh crore worth currency notes have now been returned, since 8 November, 2016. This represents about 99.3 percent of the total currency notes which went out of circulation on a single day. When Prime Minister Narendra Modi announced the demonetisation of Rs 500 and Rs 1,000 denominated currency notes, the total value of these high value currency notes in circulation was Rs 15.41 lakh crore.

At the time of demonetisation, it was felt that a significant amount of the demonetised currency would not return to the system. This would, in effect, imply that some part of the stock of unaccounted for money (black money) would be extinguished. It didn’t play out that way and most of the demonetised currency returned to the system.

The RBI had first put out this data in its annual report last year. However, at the time it had put in a caveat to say that the currency returned still needed to go through a final round of checks.

The difference between the outstanding currency notes in circulation before demonetisation and the currency notes returned to the RBI, which stands at Rs 10,720 crore, has been shifted to the central bank’s ‘Other Liabilities and Provisions’ segment. This amount was earlier a part of a liability head called ‘Notes issued’, the RBI said.

Contribution Of High Denomination Notes

Another perceived benefit of demonetisation was to bring down the proportion of high denomination notes.

However, even that benefit hasn’t played out.

In terms of value, the share of Rs 500 and Rs 2,000 banknotes, which had together accounted for 72.7 percent of the total value of banknotes in circulation at end-March 2017, increased to 80.2 percent as at end-March 2018, the annual report said.

Prior to demonetisation, Rs 500 and Rs 1,000 notes accounted for 86 percent of the currency in circulation.

The value of banknotes in circulation increased by 37.7 percent over the year to Rs 18.04 lakh crore as at end-March 2018. The volume of banknotes, however, increased by 2.1 percent.

(This article was first published on BloombergQuint.)