Hoarding unaccounted cash high in Rs 2000 notes: FM

The Rs 2000 notes, released by the Reserve Bank of India (RBI) post November 2016 demonetisation of Rs 500 and Rs 1000 banknotes, has now emerged as the favourite currency for hoarders who have used the high denomination notes to stash unaccounted cash.

In a written reply to a question in the Rajya Sabha on Tuesday, Finance Minister Nirmala Sitharaman said that 43.22 per cent of unaccounted cash seized in current fiscal year so far is in the form of Rs 2,000 notes.

The level of unaccounted cash has been higher at 60 per cent in previous fiscals FY18 and FY19, indicating a declining preference for the note, the Finance Minister told the Upper House.

In the first full financial year after demonetisation (FY18), 67.91 per cent of unaccounted cash was made up of Rs 2000 notes. It was a bit lower at 65.93 per cent in FY19.

Though the trend indicates that the percentage of Rs 2,000 notes found by the Income Tax Department in cash seizures has been on the decline, it has raised questions again whether high value currency promotes hoarding and gives a fillip to black economy.

The data given by the Finance Minister in Parliament has been provided by the Income Tax Department on the basis of an analysis of cases of cash seizures of over Rs 5 crore during the past three fiscals.

"To bring transparency in the source of funding to political parties, the provisions of section 13A of the Act have been amended to inter alia provide that no donations of Rs 2,000 or more shall be received otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account or through electoral bonds," the Finance Minister said.

While the Finance Minister did not outline any plan with respect of future course of action for the high value currency, several Finance Ministry officials have said in person that some action is needed to prevent misuse of the Rs 2000 note.

Former Finance Secretary Subhash Chandra Garg had earlier said that Rs 2,000 notes can be demonetised without causing any disruption. He also said that majority of these notes are not in circulation since they are being hoarded.

As of March 31, 2019, 329.1 crore pieces of Rs 2,000 currency note were in circulation with a value of Rs 6.582 lakh crore.

( With inputs from IANS )