Roughly Rs 12.6 lk cr of old notes deposited with banks: Report

Moneycontrol BureauAround Rs 12.6 cr of cash in old Rs 500 and Rs 1000 notes has been deposited with banks till December 3, says a report in the Bloomberg, quoting anonymous sources.Initially, the government was expecting that at least Rs 3 lakh crore of cash in old notes would not be deposited in banks due to fear of scrutiny by tax authorities.With the deadline for returning old notes to banks another 25 days away, and also factoring the cash with banks and in ATM machines prior to the demonetisation announcement, it now seems that the entire Rs 14.5-15 lakh crore of old notes may return to the banking system.In theory, unreturned cash would have allowed the RBI to transfer an equivalent amount to the government, without increasing the money supply in the system. The government could have then used this supposed windfall for infrastructure spending or some welfare scheme.Now it looks highly unlikely that the government will net any meaningful amount by way of a windfall. The government may still get a tidy sum by way of penalties under the Income Declaration Scheme. But that amount will in no way be near the initial estimate of cash that would not be deposited with banks.Also, as CNBC-TV18’s Latha Venkatesh writes in her column, there could be technical hurdles in the way of the government getting its hands on the cash (in old currency) not deposited with banks.Excerpts from the column: “…people can go to specified offices of the Reserve Bank of India up to March 31 and deposit the old otes after submitting a declaration form. In fact experts say RBI is legally bound to extend this date. The correct procedure ought to be to keep the unclaimed money in a special account in the liabilities side of its balance sheet and use it whenever claims come. Short point, on February 1 when the budget is prepared, the government cannot legally claim any of the unclaimed money. Only on July 1 when the RBI prepares its balance sheet will one know how much is the unclaimed amount and how the RBI has chosen to treat it. At best the government can hope for a dividend from its current year’s surplus which may well not be as high as the Rs 65,000 crores that Governor Rajan declared every year during his tenure. That’s because this year the RBI too has spent a decent amount of cash accepting banks’ surplus in its reverse repo window and will probably will have to do so for many more months in 2017. Hence, any fiscal stimulus because of demonetisation and RBI largesse looks difficult.”