New Delhi: The enforcement directorate (ED) on Wednesday conducted searches on hawala operators at 40 locations across India who were allegedly helping individuals convert unaccounted-for cash in banned bank notes into legitimate currency, said two people with direct knowledge of the matter, out of them a senior ED official.
“We have conducted searches on hawala operators at 40 locations, they were acting as agents and helping convert unaccounted money in banned denominations into accounted money,” a senior ED official said, on condition of anonymity.
Hawala is an alternative remittance channel that exists outside of the traditional banking system. It is a method of transferring money without any actual movement.
“These operators were buying the banned currency notes at a discount and converting these into legitimate money by depositing them into accounts in smaller cities and towns,” said the second person, who also declined to be named.
This is how it worked. Hawala operators, through traders, hawkers and small time shopkeepers, were buying the now banned Rs500 and Rs1,000 notes from businessmen, jewellers, realtors and traders at a discount of 30-40%. This money would be sent to small cities and towns and deposited in accounts that are likely to escape scrutiny, such as low balance accounts and Jan Dhan accounts.
Jan Dhan bank accounts have seen a spike in deposits since the currency reset on 8 November. Data for the two weeks since 8 November show that while the week-on-week increase in the number of such bank accounts was 0.3% and 0.4%—in line with the last three months—there was a surge in the account balance of all three categories of banks: public sector banks, regional rural banks and private banks.
The account balance surged 39-49% in the first week and 11-23% in the second. In the 11 weeks prior to 8 November, the highest week-on-week change in account balance was 1.6%.