Note ban to benefit economy in long run even if it hits GDP now: Jaitley

New Delhi: Finance Minister Arun Jaitley on Thursday said the fallout of demonetisation was on predicted lines and the economy will benefit in medium and long term.

A day after the Reserve Bank said that almost all of the demonetised currency came back into the system, Jaitley said the fact that money got deposited in banks does not mean that all of it is legitimate money.

"It's nobody's case that black money has been completely eliminated after demonetisation," he said.

The note ban move will benefit the economy in medium and long term even if it hits GDP in two or three quarters, he said. Jaitley's announcement comes close on the heels of the GDP data release on Thursday.

He said demonetisation, coupled with GST, will give a "significant boost" to direct tax revenues as many people have come under the tax net.

Although an overwhelming amount of money was deposited in banks it is not a concern for the government as it is good for the economy that more money has come into the formal system.

"The fallout of demonetisation is on predicted lines ...the fact that money got deposited in banks doesn't make it legitimate money," he said, adding the country was ready for demonetisation even though there was political resistance.

The RBI on Wednesday said about 99 per cent of Rs 15.44 lakh crore demonetised currency came back into the system.

On the Goods and Services Tax (GST), Jaitley said its inflationary impact has been avoided and there is a scope of convergence of tax rates going forward.

The minister also said that consolidation of PSU banks is on cards as the country needs "fewer but stronger banks".

On bad loans, he said that resolution will take time. "You can't have a surgical solution to it", he said, adding that if private sector cannot pay back its debts then someone else should be allowed to take over.

The RBI has already recommended banks to initiate insolvency proceedings against 12 large defaulters.