demonetisation, rbi, remonetisation, notes returned, bank deposits, modi
A person stands with his documents in a queue outside a branch of the State Bank of india as people wait to exchange old high denomination bank notes in Old Delhi, India, November 10, 2016.Reuters file

Prime Minister Narendra Modi may not land a windfall of Rs 1 to 1.5 lakh crore as a result of demonetising Rs 500 and Rs 1,000 currency notes, if the quantum of notes returned to the banking system is any indication. A new report puts the value of notes returned as ~ Rs 15 lakh crore (the value of demonetised notes stood at about Rs 15.44 lakh crore) at the time of Modi's announcement on November 8, 2016.

The Reserve Bank of India (RBI) has sought to downplay the figure, saying reconciliation process is still underway. 

"We would like to clarify that the periodical SBN figures released by us were based on aggregation of accounting entries done at the large no of Currency Chests all over the country. Now that the Scheme has come to an end on December 30, 2016, these figures would need to be reconciled with the physical cash balances to eliminate accounting errors/ possible double counts etc.

"RBI has already initiated this process and till this is completed any estimate may not indicate the actual numbers of the SBNs that have been returned. RBI is taking all steps to complete the process expeditiously so as to release firm figures of SBNs received at an early date," the central bank said on Thursday.

News agency PTI, referring to sources, had reported on Wednesday that the RBI has received "close to Rs 15 lakh crore" worth of demonetised notes, though finance minister Arun Jaitley expressed ignorance on the development.

The last official updates on notes returned was released by the Reserve Bank of India (RBI) almost a month ago, when it had said ~80 percent of the banned notes was back.

"Specified Bank Notes (SBNs) of ₹ 500 and ₹ 1000 returned to RBI and Currency Chests amounted to ₹ 12.44 lakh crore as of December 10, 2016," the RBI had said in a statement, quoting deputy governors R. Gandhi and S. S. Mundra.

Estimates by economists had made the projections (of ~ Rs 1 to 1.5 lakh crore), assuming that about 10 percent of the demonetised notes (valued at Rs 15.44 lakh crore) won't come back to the banking system. This, it was said, would be the"fiscal dividend" that would accrue to the government and therefore, the note ban decision was worth it.

The pace at which the notes were being returned to the system prompted BofA Merrill Lynch to sharply reduce the estimated windfall that would accrue to the government post demonetisation. 

"How much can Budget 2017 raise from demonetisation? clients ask. Rs1500bn, we estimate, down from Rs2000bn earlier," BofA Merrill Lynch Global Research said in its report on Wednesday.

The spike in the government's kitty could still happen in the form of steep penalty that will be imposed on those declaring undisclosed income under the second amnesty scheme, the Pradhan Mantri Garib Kalyan Yojana (PMGKY) 2016.

"Tax @30% of the undisclosed income, surcharge @33% of tax and penalty @10% of such income is payable besides mandatory deposit of 25% of the undisclosed income in Pradhan Mantri Garib Kalyan Deposit Scheme, 2016. The deposits are interest free and have a lock-in period of four years," the finance ministry had said, explaining the most relevant aspects of the scheme.

Declarations under the PMGKY can be made till March 31, 2017.