Mumbai: As much as 99 per cent of the junked Rs 500 and Rs 1,000 notes have returned to the banking system, RBI said today, prompting opposition to question the efficacy of the government’s unprecedented note ban decision to curb black money and corruption.

The Reserve Bank, which has so far shied away from disclosing the actual number of junked currency deposited after November 8 last year, said in its Annual Report for 2016-17 that Rs 15.28 lakh crore of the junked currency had come back into the banking system, leaving only Rs 16,050 crore out.

As on November 8, 2016 there were 1,716.5 crore pieces of Rs 500 and 685.8 crore pieces of Rs 1,000 in circulation, totalling Rs 15.44 lakh crore.

Post-demonetisation RBI spent Rs 7,965 crore in 2016-17 on printing new Rs 500 and Rs 2,000 and other denomination notes, more than double the Rs 3,421 crore spent in the previous year.

The demonetisation was hailed as a step that would curb black money, corruption and check counterfeit currency but RBI said just 7.1 pieces of Rs 500 note per million in circulation and 19.1 pieces of Rs 1,000 notes per million in circulation were found to be fake in its sample survey.

Opposition was quick to seize on the data to attack the government with former finance minister P Chidambaram saying, “RBI ‘gained’ Rs 16000 crore, but ‘lost’ Rs 21000 crore in printing new notes! The economists deserve Nobel Prize.”

“Rs 16,000 cr out of demonetised notes of Rs 15,44,000 cr did not come back to RBI. That is 1 per cent. Shame on RBI which ‘recommended’ demonetisation,” he tweeted.

Chidambaram also wondered if demonetisation was “a scheme designed to convert black money into white?”.

Samajwadi Party leader Naresh Agarwal said his party would move a privilege motion against RBI Governor Urjit Patel for misleading a parliamentary panel on the issue.

RBI said just 8.9 crore pieces of Rs 1,000 notes or 1.3 per cent of the scrapped ones have not returned. It, however, did not give a specific number for the old 500 rupee notes.

“Subject to future corrections based on verification process when completed, the estimated value of specified bank notes (SBNs) received as on June 30, 2017 is Rs 15.28 trillion,” the central bank said.

After the note ban, old notes were allowed to be deposited in banks, with unusual deposits coming under income tax scrutiny.

A collateral damage as a result of rise in printing and other cost was dividend RBI pays to the government.

RBI said its income for 2016-17 decreased by 23.56 per cent while expenditure jumped 107.84 per cent.

“The year ended with an overall surplus of Rs 306.59 billion as against Rs 658.76 billion in the previous year, representing a decline of 53.46 per cent,” it said.

The government replaced old Rs 500 notes with new ones, but no replacement for Rs 1,000 notes have been made. Instead, a new Rs 2,000 note was introduced post note ban.

RBI said there are as many 588.2 crore of Rs 500 notes, both old and new in circulation as of March 31, 2017. As of March 31, 2016, there were 1,570.7 crore Rs 500 notes in circulation.

As many as 328.5 crore pieces of new Rs 2,000 notes were in circulation as on March 31, 2017.

Besides, new Rs 500 and Rs 2,000 notes, the RBI has also circulated new Rs 200 notes last week.

Former RBI Deputy Governor R Gandhi said demonetisation will have long-term impact.

7.62 lakh pieces of FCNs detected in FY17: RBI

New Delhi:As many as 7,62,072 pieces of counterfeit notes were detected in the banking system last fiscal, a 20.4 per cent increase over the previous year, the Reserve Bank said today.

During 2015-16, 6.32 lakh pieces of fake currency notes had been detected, the central bank said in its annual report for 2016-17.

It also said that barring Rs 100, the detection of counterfeit notes increased across denominations – notably, Rs 500 and Rs 1,000 — during the last fiscal.

In the report, the RBI said that coincident with the announcement of the withdrawal of Rs 500 and Rs 1,000 notes on November 8, 2016, it launched a nation-wide exercise to estimate the density of fake Indian currency notes (FICNs) detected during the counting and verification of notes.

“The result showed the rate of FICN detected per million pieces of notes processed at the CC (currency chest) level at 7.1 pieces for Rs 500 denomination and 19.1 pieces for Rs 1,000 denomination, which were higher than the rate of detection at the Reserve Bank,” it added.

At the RBI’s currency verification and processing system, in 2015-16, there were 2.4 pieces of FICNs of Rs 500 denomination and 5.8 pieces of Rs 1,000 for every million pieces notes processed; which rose to 5.5 pieces and 12.4 pieces, respectively, during the post-demonetisation period.

Fall out of DeMo on predicted lines: Jaitley

New Delhi: Finance Minister Arun Jaitley today 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.

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 yesterday 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.

Jaitley hopeful of 7% GDP as manufacturing ‘bottoms out’

Finance Minster Arun Jaitley today attributed the lower GDP numbers to pre-GST destocking of goods and expressed hope that the economy will grow at 7 per cent, saying manufacturing has bottomed out.

He further said that improvement in the global economy and good monsoon will aid GDP growth in the coming quarters which ought to be better if the country is to achieve the annual growth target.

The Economic Survey had projected a growth of 6.75 per cent to 7.5 per cent for 2017-18.

“Global economy is improving faster than what we thought and that is a positive trend. The domestic public investment is certainly going to be quite high because the revenue trend seems to be positive.

On the same rationale, with reforms continuing, the confidence in the economy globally being high, the FDI (inflow) will continue. The monsoon overall — the bigger picture — looks to be good and therefore that should send a positive impact,” he said.

“Another area of possibility is, are we able to get early successes for the banking system for the insolvency itself,” he said.

Terming the first quarter GDP data as a matter of concern, the finance minister said the government requires both in policy and investment to work more to improve this figure.

The detailed analysis shows that whereas the agriculture is in the normal range, the manufacturing has bottomed out to 1.6 per cent from 3.1 per cent.

The investment and services have improved, he said, adding the decline in manufacturing is because of GST impact.

“Since it was announced that GST would come into operation from July 1, most manufacturers were de-stocking during period April-June. As a result, trading went up because sales were taking place but it was stocks which were being sold. No new manufacturing happened,” he said.

This seems to be the pre-GST impact of de-stocking and that seems to be the most predominant reason, other factors could have also contributed, he added.

When asked about whether the GDP can grow at 7 per cent this fiscal, Jaitley said, “I am hopeful, because of the pre- GST de-stocking, this would really be the bottoming out.”

Earlier, Economic Affairs Secretary S C Garg said the growth is expected to improve in the next few quarters.

“Demonetisation, GST were the measures that impacted economic activities in the past 6-7 months. Those (demonetisation and GST) have reasonably played out now and from next quarter onwards, we would see the positive implication and impact of these two on GDP growth,” Garg said.

India is sitting in a quarter where economy has started turning the corner, he added.

Demonetisation biggest success: BJP

New Delhi:The BJP today rejected the opposition’s criticism of demonetisation, saying it has been the “biggest success” as it has proved to be a major step towards establishing a “clean and honest” economic order.

All suspected black money transactions with banks are under the government’s scanner and those found having deposited unaccounted cash will be taxed. It will give a boost to revenue collection, Union minister Piyush Goyal said.

“Demonetisation has been the biggest success. It has made all the money deposits in banks traceable and the economy clean. It also enhanced liquidity with banks, resulting in lower taxes and more money for welfare measures,” he said.

Dismissing the opposition’s attack on the government, Goyal claimed that those criticising the measure do not understand economics.

Demonetisation instilled a sense of “fear” among tax evaders and increased compliance among people, leading to the “success” of the Goods and Services Tax.

“It has been a big step towards creating a clean and honest economic order,” he said, adding that it has led to a huge increase in digital transactions.

It has also led to creation of massive data for the government, he said.