COMMENT: The Rs 21,000-cr Jan Dhan deluge and a flood of questions

Shishir AsthanaMoneycontrol Research Social media is reading between the lines on politicians crying foul over demonetisation and the sudden spurt in deposits in Jan Dhan Yojana. What has caught their eye is how the poorest of poor in the country could deposit Rs 21,000 crore in 13 days. The Pradhan Mantri Jan Dhan Yojana – essentially zero deposit accounts -- saw this sharp jump in deposits after Prime Minister Narendra Modi announced demonetization of higher denomination Rs 500 and Rs 1,000 notes and resulted in a surge of a Rs 5 lakh crore deposits overall.According to details available on Pradhan Mantri Jan Dhan Yojana website, 25.51 crore accounts were opened throughout India out of which nearly a quarter had not seen any transactions until the PM made his announcement on November 8.  This is what makes the sudden surge even more remarkable.That there is something fishy about these accounts has been highlighted by Modi and other government agencies. In his speech in Agra, Modi appealed to the poor not to allow their Jan Dhan accounts to be misused. Finance Minister Arun Jaitley had also said the government is looking into sudden ‘popping up’ of money into zero balance accounts.RBI’s principal adviser, Alpana Killawala has pointed out that it has come to their notice that gullible persons were exchanging these notes on behalf of others; some are even helping them by depositing the hoarded cash into their own account. A Firstpost report reveals that IT sleuths have begun to crack down on these accounts using the output of cash transaction reports and suspicious transaction reports.The jury is still out there on who is worst affected by demonetization, but the rising decibels from a political class that cites harassment to the general public have not fooled many. Modi in his speech seemed to point a finger at Bengal CM Mamata Banerjee when he said that politicians behind chit fund scams were now attacking him. Modi also took a dig at Mayawati for accepting ‘garlands of notes’.Politicians are normally not generators of black money, but are rather the receiver. It’s the business class that generates black money by avoiding taxes and using it to get undue benefits by financing politicians in elections. Use of cash for electioneering is an open secret in India. Demonetization has hit this source of funding of all political parties. News reports say that  bank officials are under political pressure to convert their black money through Jan Dhan accounts.What raises suspicion is the fact that people who did not have even a single rupee to deposit in their account are now depositing just below Rs 50,000 in their account in high denominations. Less than Rs 50,000 is deposited to avoid submission of PAN cards. The key question is the outcome of Rs 21,000 crore. Though IT officials will know who the account holder is, tracing it back to the actual provider will be a nightmare. Assuming that most of the accounts saw the maximum limit of Rs 50,000 in deposit, officials will have to chase 42 lakh account holders, or around 15 percent of existing tax payer base. Does the income tax department has the wherewithal to chase so many small accounts, or will it focus on bigger deposits?As was seen during the recovery of microfinance loans in rural Andhra Pradesh, chasing these accounts would be a political nightmare. Local politicians would play vote bank politics the moment IT sleuths start chasing these account holders. Further, since the amount would be below the tax exemption limit of Rs 2.50 lakh, there is very little that the government can do unless they are unable to establish a link between the hoarder and depositor. Furthermore, Rs 50,000 is not too big an amount, even in rural areas for an individual to store at home.There is also a minor detail that government will have to keep in mind. Bengal, which has the largest share of new deposits, has also had the largest share of JDY deposits since the scheme was launched.Will the real hoarders ever be brought to books is an open question. Clarity on Jan Dhan deposits will only come after December 2016 when the data is screened, scrutinized and account holders give their details. Till such time accusations will fly thick and fast in main stream media as well as social media over who deposited the money.