To cull black cash, banks told to scan all deposits

New Delhi: To ensure black money does not escape taxation, the Union finance ministry has asked banks to scan millions of accounts and maintain records of all old and new currency notes deposited by each individual since the government’s demonetisation move.

Rs 11.85 lakh crore in the now-scrapped Rs 500 and Rs 1,000 notes has been deposited in banks after the government recalled the two high-value notes on November 8 to flush out black money and counterfeit currency from the economy.

While the move led to a massive cash crunch in the country, the government had expected a “black money windfall” of about Rs 3 lakh crore after cash worth Rs 14.94 lakh crore was demonetised. But there is a worry of almost all of the scrapped cash coming back to the banking system since the deposit deadline is December 30.   

Earlier the government had said that it would probe and send notices to those who have deposited, between November 9 and December 30, more than Rs 2.5 lakh in the demonetised banknotes. While filling up deposit slips, customers are required to clearly mention amounts deposited in old and new notes (till December 30).

While the move apparently aims at preventing frauds being committed by banks during deposits of old notes, it will also help the government probe any individual as and when needed. Scanning accounts will make it easier for investigative agencies like the income-tax (I-T) department and the enforcement directorate (ED) to probe individuals.

However, some experts feel it’s a near-impossible exercise since there are millions of banks accounts — both in private and nationalised banks. For instance, a 2011 report of the Reserve Bank of India show that there are 624 million savings bank accounts in the country.  The Crisil, a rating agency, said that there are over 800 million savings accounts in the country. Going through each and every individual account, experts feel, “will be a humongous task” and wondered if the I-T department has the infrastructure or manpower to do so.

In a letter to the heads of PSU banks and the chairman of Indian Bankers’ Association (IBA), the finance ministry has said that maintenance of records regarding deposits of demonetised and non-demonetised banknotes “is essential both in records of banks and customers.”

The letter stated that “all banks in the country be alerted to reflect correctly cash deposits in old and new notes and inform customers about the same.”

The ministry has asked the MDs and CEOs of PSU banks and the IBA’s chairman that the directive must be followed scrupulously. Any deviation in this regard has to be prevented, and if noticed, dealt with firmly and immediately, it has said.

The letter stated that banks must request customers to fill up deposit slips clearly indicating old and new notes and their denominations. The ministry has said that action taken in this regard be reported by November 16.

Meanwhile in Delhi, the I-T department has been surveying bank branches in Chandni Chowk for money laundering attempts by traders.

According to reports, after December 30 , the I-T department will launch a massive crackdown on black money deposited in banks during the demonetisation drive. The government has already passed an amendment in the I-T Tax Act in Lok Sabha, which allows imposition of a tax and a penalty of up to 85 per cent on untaxed money deposited in banks after November 8.

The I-T department has already referred  30 cases to the ED and the CBI where it found serious irregularities beyond the preview of the I-T Act so as to examine criminal conduct.