Kanpur Raid: How Middlemen Are Still Converting Demonetised Notes

Is seizure of Rs 97 crore in demonetised notes from Kanpur just the tip of the iceberg?

The UP Police on Tuesday, 16 January, seized demonetised notes worth Rs 97 crore from a gang of 16 members in Kanpur. The gang members have been arrested and charged under various Sections of the IPC and Sections 5 and 7 of the Specified Bank Notes (Cessation Liabilities) Act, 2017.

But, why was this gang amassing demonetised currency months after the government closed all channels to exchange them? UP Police has alleged that the accused duped people with false promises of converting old notes into new ones. According to the Alok Singh, IG, Kanpur Police,

During investigation, we found that the gang had promised a 15% return to people on their old notes. These middlemen were further expecting a 30-35% return on old notes from another middleman based in Delhi.

Alok Singh, IG, Kanpur Police

The police is yet to locate and arrest the Delhi based middleman.

But while some honest people still rue the loss of money that couldn't be exchanged in time, how is it that certain middlemen are able to get their hands on new notes for old ones? According to former RBI Director Vipin Malik, middlemen such as these have two possible options of converting old notes.

• Some rogue elements in the banks could be misusing the treasury (where old notes are stashed). According to Malik, the final or micro counting of the old notes is not yet complete. Hence these middlemen, in connivance with the bank officials, could be stashing old notes in the treasury.
• Neighbouring countries like Nepal, Bhutan, Bangladesh and Zimbabwe are still waiting to exchange old Indian notes, because the Indian government is yet to decide how to exchange them. So according to the Former RBI officer people could be laundering old notes to these countries, as we still don’t have the exact amount of old notes in these countries.

This is not the first time such an incident has come to light. On 8 November 2017, the NIA seized over Rs 36 crore in demonetised currency from nine people, who were allegedly linked with separatists and terrorists.

The seizure of Rs 97 crore in demonetised notes clearly establishes that people are still holding on to large amounts of old notes. But the larger question is, will the agencies crackdown on top bank officials who are purportedly hand-in-glove with these middlemen?

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