MUMBAI: Since November 8, the day Prime Minister Narendra Modi announced demonetisation of high-value notes, there has been speculation and conspiracy theories about the massive Rs 2.87lakh crore rise in bank deposits in September. Doubts were raised if a section of the ruling party had prior knowledge about the withdrawal of Rs 1,000 and Rs 500 notes and deposited their ill-gotten money just in time.
A new research says that a large part of this sharp rise in deposits could be attributed to the inflows from the seventh pay commission arrears and also to the government’s income disclosure scheme between June and September this year. A similar trend was observed in 1997, when the then finance minister, P Chidambaram, had come out with an amnesty scheme, the report pointed out.
The research report by India’s largest bank SBI pointed out that a large part of the rise in total deposits could be “because of reasons related to the Income Disclosure Scheme (IDS) that ended on September 2016. Alternative ly, given that IDS attracted a penalty of 45%, people may have preferred to disclose these as forceful depositsadvance tax payments so as to pay a tax of 30% and not 45%“.
The report, by Soumya Kanti Ghosh, group chief economic adviser, SBI, pointed out that the average increase in deposits during September in the last 12 years was around Rs 1 lakh crore, while the average over the last three years was about Rs 1.56 lakh crore. So about 40% of this Rs 2.87 lakh crore incremental deposit added in September this year was a normal phenomenon.On top of this, around Rs 45,000 crore came in because of arrears after the recommendations of the seventh pay commission were implemented in the first week of the month. Of the balance Rs 1.5 lakh crore, a large percentage came in because of people’s preference to pay lower tax under the regular income tax rules than higher taxes under IDS.