Despite the Reserve Bank of India dismissing reports that suggested 97 per cent of the demonetised currency had returned to the bank’s coffers by December 30, its own weekly figures on ‘currency in circulation’ indicate that this number is correct. These figures, in fact, suggest that only Rs54,000 crore of the notes banned on November 8 last year failed to make it back.
More worryingly, this figure has been arrived at on the assumption that no new notes were issued after December 19 -a near impossibility. This could well open up the intriguing possibility that more banned notes may have returned than were said to be in circulation. December 19 was the last time the RBI gave any information on how much of the demonetised currency was back. Even the tally on new notes circulated are not available. On Friday (January 13), in its weekly statistical supplement, the RBI said that the currency in circulation till January 6 was Rs8.98 lakh crore.
This comprises new high-denomination currency notes of Rs500 and Rs2000, smaller new and old currency notes of Rs100, Rs50, Rs20 and Rs10, plus the banned currency notes of Rs500 and Rs1,000 which have not been returned. On January 5, the RBI had sought to question figures of 97 per cent return of banned currency put out by news agency Bloomberg.
In a statement RBI said “figures would need to be reconciled with the physical cash balances to eliminate accounting errors/possible double counts etc,” and till then ‘any estimate may not indicate the actual numbers’. let us now calculate from RBI’s figures how much of the banned notes are back.
On November 8, according to reply given in Rajya Sabha on December 2 by the Minister of State for Finance, Arjun Ram Meghwal, there were 17,165 million pieces of Rs500 notes and 6,858 million pieces of Rs1,000 notes in circulation. That amounts to a total of Rs15.44 lakh crore in value
Finance Minister, Arun Jaitley, had said that in value terms this was 86 per cent of the total currencies in circulation, which would amount to Rs17.95 lakh crore (Rs17.97 lakh crore on November 4, according to RBI). From November 10 onwards, banned currency notes were deposited in the banks till December 30 and new currency notes started gradually being issued by the RBI in denomination ranging from Rs10 upwards, including the new Rs500 and Rs2000 notes.
On November 18, according to RBI’s statement on reserve money, there were 14.27 lakh crore in circulation, including Rs2.51 lakh crore (14 per cent) of smaller denomination notes which had not been banned, new currency notes and banned currency notes. We do not know the exact break-up, as RBI or the government did not give it.
The first time the RBI spoke of a break-up of new notes was on December 7 during the monetary policy press conference. Deputy Governor R. Gandhi said that a total of Rs4 lakh crore in new notes had been circulated till December 6, out of which 19.1 billion notes (which amounts to Rs1.06 lakh crore) were in small denominations of up to Rs100 and the rest (Rs2.94 lakh crore) were in high denominations of Rs500 and Rs2,000.
The December 9 figures (the first after the RBI press conference figures) given in reserve money statement showed that Rs9.81 lakh crore in value terms were in circulation. This includes Rs2.51 lakh crore of small denominations already in circulation on November 8, Rs1.06 lakh crore of new small denomination currencies and Rs2.94 lakh crore in high denomination notes (Rs500 and Rs2,000) -- a total of Rs6.51 crore.
That means that, on December 9, only Rs3.29 lakh crore (Rs9.61 minus Rs6.51 crore) of the banned high denomination notes remained to be returned. In other words, a total of Rs12.14 lakh crore of old notes out of Rs15.44 lakh crore had been returned. This is similar to the figure for December 10 -Rs12.44 lakh crore given by the RBI’s Gandhi to the media on December 13.