Mumbai: Reserve Bank of India’s estimate on invalidated notes received after demonetisation may still be incomplete, as old Rs 500 and Rs 1000 notes continue to lie with a few cooperative banks, according to three people aware of the matter.
Eleven District Central Cooperative Banks (DCCBs) claim they hold old notes worth Rs 147 crore forming cash in hand balance as on 8 November 2016, according to one of the three people. However, RBI has refused to accept these notes of Rs 500 and Rs 1000 denomination lying with these banks.
Several DCCBs, including Villupuram DCCB, Kolhapur DCCB and Pune DCCB, have filed petitions in the Supreme Court requesting acceptance of these notes. The next hearing is slated on 4 September, said the three people cited above. Banks across India, including cooperative banks, started exchanging and receiving deposits of invalidated Rs 500 and Rs 1000 notes from 10 November. Four days later, on 14 November, the Reserve Bank of India (RBI) prohibited cooperative banks from accepting these notes. By then, as per Nabard data, about Rs 22446 crore was already deposited at 370 DCCBs and moved to RBI’s currency chests with no (know your customer) KYC verification.
About Rs 7000 crore was still lying with these banks at that time, which RBI refused to accept fearing some of it may be illicit cash.
Several DCCBs challenged this ban in the Supreme Court, which directed Nabard—the regulator of DCCBs—to verify KYC details of individuals and PACs who deposited this money. On 20 June, the government allowed DCCBs to exchange old currency notes collected from account holders between 10 and 14 November 2016. But this did not include cash in hand at the close of 8 November.
“Pune DCCB has Rs22 crore worth of high value notes currently, which is cash in hand as on 8 November. This couldn’t be exchanged because currency chests of banks had no space, said Sanjay Kumar Bhosale, chief executive officer, PDCC bank.
“Cash worth Rs 25 crore, set aside for meeting daily liquidity requirement, is now lying with Kolhapur DCCB. This is against the Banking Regulation Act, which mandates that 4% should be set aside for meeting cash reserve ratio,” said Pratapsinh Chacan, chief executive officer, Kolhapur DCCB. “We had written to RBI and the government before filing the petition. But there has been no response so far,” he added.
Emails sent to RBI and Nabard didn’t elicit any response.
RBI in its annual report said that it received close to 99% or Rs 15.28 trillion worth of banned notes as of March 2017.
This compares to Rs 15.44 trillion of the Rs 500 and Rs 1000 notes that were in circulation as of 8 November, according to data provided by minister of state for finance Arjun Meghwal to Parliament on 21 January.
However, RBI cautioned in its report that this figure is subject to future corrections based on verification process when completed.