Home / Industry / Banking /  Arun Jaitley’s budget speech gives clues about demonetisation deposits in banks

New Delhi: One of the biggest expectations with Union Budget 2017 was that the government would divulge details of how much money has come back to the banking system after demonetisation. While the budget has disappointed in terms of giving overall statistics on this count, it does give an idea about the extent of money which has come in deposits of Rs2 lakh and above.

This is what Arun Jaitley had to say in his budget speech: “After the demonetisation, the preliminary analysis of data received in respect of deposits made by people in old currency presents a revealing picture. During the period 8th November to 30th December 2016, deposits between Rs2 lakh and Rs80 lakh were made in about 1.09 crore accounts with an average deposit size of Rs5.03 lakh. Deposits of more than 80 lakh were made in 1.48 lakh accounts with average deposit size of Rs3.31 crores."

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The total amount which has been deposited under these two categories can be calculated by multiplying the number of accounts with the average deposit figures mentioned by Jaitley. This gives a figure of Rs5.48 lakh crores for deposits worth less than Rs80 lakh and Rs4.89 lakh crore for more than Rs80 lakh. The aggregate deposits under the two categories amount to Rs10.38 lakh crore. This works out to around two-third of the total value of demonetised currency, which was valued at around 15.44 lakh crore. These figures also tell us that around 31% of total value of demonetised currency has come back in individual deposits of Rs80 lakh or more. These figures show that a large chunk of the demonetised currency which has come back into banks is from the super-rich.

How much of the deposits reflect unearthed black money?

According to Jaitley, there are more than 3 lakh companies which show profits. There are 76 lakh individuals who report annual income greater than Rs5 lakh. Out of this 56 lakh individuals belong to the salaried class, which means that their avenues for tax evasion are extremely limited. The rest 20 lakh individuals include businessmen and professionals.

It is possible that several of the high-deposit accounts belong to those who are already in the tax net, and have legitimate reasons for holding on to cash. The finance minister has not said anything about whether these are individual or business accounts. In the latter category, a lot of cash could be classified as cash in hand for business purposes, and it would be difficult to say whether these deposits reflect unearthed black money.

However these numbers point to one unequivocal conclusion: most of the super-rich did not flush their cash stocks down the pit. Instead, they have chosen to park their money with banks, fully aware that this might invite scrutiny from taxmen. It is therefore likely that they will have good answers ready if and when the taxmen come to ask questions. There is very little reason to hope that the post-demonetisation data mining exercise will help unearth a significant amount of black money. This should not come as a surprise to those who have taken even a cursory look at the findings of taxmen on black money, who have reported in the past that cash is the least preferred way of holding unaccounted money.

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