Bulk of scrapped currency is back in banking system

Of the Rs15.4 lakh crore worth of Rs500 and Rs1,000 notes that were scrapped as a result of their demonetisation on 8 November, as much as Rs14 lakh crore has been deposited in banks and thus made its way back into the monetary system, reports The Times of India.

The value of scrapped currency returned exceeded the government's expectation that as much as Rs3 lakh crore will not be returned as it would be part of black money hoards.

This also means that the expectation that the Reserve Bank of India will be able to give a substantial dividend to the government will be belied. While the value of deposits indicates that ways were found to deposit unaccounted money, the government expects to gain tax revenues from large deposits above the prescribed Rs2.5 lakh per individual limit.

The government also sees gains from small savings that were kept in households being deposited in bank accounts that make these funds productive and safe.

The government has announced a scheme that provides for a 50 per cent penalty for voluntary disclosure of deposits in excess of allowed limits with 25 per cent of the funds to be placed in a fund for welfare of the poor for four years.