Banks get back 80 per cent of scrapped Rs 500, 1000 notes: RBI

Mumbai: Banks have taken back Rs 12.44 trillion ($184.24 billion) of high-value currency that the government abruptly abolished in November, Reserve Bank of India Deputy Governor R Gandhi said on Tuesday.

That represents about 80% of the Rs 15.44 trillion rupees in 500- and 1,000-rupee notes that were circulating before Prime Minister Narendra Modi abolished them on November 8, in a surprise move targeting counterfeiters and people holding undeclared wealth.

Analysts had estimated that only about 13 trillion of those abolished notes would be deposited at banks, because people with undeclared cash would be wary of attracting the scrutiny of tax authorities.

The people have until December 31 to turn in their old notes.

Economists said total deposits were likely to reach about Rs 13 trillion to Rs 13.5 trillion by the end of the year, in line with the estimates.

"The old notes of Rs 500 and Rs 1000 which have been returned back to the Reserve Bank and the currency chest amounted to Rs 12.44 trillion as of December 10, 2016," Gandhi said in a short news briefing.

The RBI has printed some 1.7 billion new 500- and 2,000-rupee notes, which will replace the abolished notes, Gandhi said. That is a fraction of the 24 billion individual notes that were withdrawn.

Modi's action has created a widespread cash shortage that has hit many aspects of the economy, from manufacturing to consumer demand.

But Modi says it was necessary to crack down on India's shadow economy, although the people with black money have resorted to ingenious ways to try to deposit their undeclared assets, such as splitting up their money and paying others to temporarily park it in their bank accounts.

The government and the RBI have vowed strict action against those believed to be trying to deposit undeclared assets, including tougher scrutiny of all deposits of more than Rs 250,000.

The RBI on Tuesday also asked banks to keep all CCTV footage from November 8, in another bid to scrutinise depositors.

A source at the Central Bureau of Investigation said on Tuesday it had arrested an RBI officer in Bengaluru for "unauthorised changing" of Rs 600,000 in old 500- and 1,000-rupees notes.

RBI Deputy Governor SS Mundra, at the same news briefing, said a junior central bank official had been "suspended" because "he was recorded to be present in a bank branch where some suspected transaction was happening."

"We have instituted investigation and due action would be taken once the details are ascertained," Mundra said.