Demonetisation violation? Banks accepted over Rs 1 lakh crore lakh without PAN details.


In the weeks after demonetisation, banks across India received about Rs 1.13-lakh crore in “high-value deposits” from customers without valid documents, indicating possible collusion of officials to conceal dodgy cash, classified government data accessed by HT revealed.

About half of these transactions took place in six states -- Gujarat, Rajasthan, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh and Karnataka. The deposits have raised the suspicion of the Financial Intelligence Unit (FIU), a government agency that monitors illicit transactions.

A high-value transaction is defined as a bank deposit above Rs 2.5 lakhs that the government made liable for tax scrutiny as part of its cash-purging, anti-corruption campaign launched on November 8.

Together, these states also received a third of all high-value bank deposits – with and without identity documents -- made in the first two months of demonetisation. In these states, Jan Dhan deposits under the government’s banking-for-poor programme were 25-30% higher than the national average.

But to be fair, these states are farming and trading hubs that see high volumes of cash deals. Plus, farm income is not taxed.

The November 8 scrapping of 500-and 1,000-rupee banknotes was aimed at stamping out illegal cash from the economy. But many say corrupt bank officials helped some people park their ill-gotten cash in others’ accounts. In December, two junior central bank officials were arrested in Bangalore for illegally converting banned currencies for the new.

HT analysed bank data for 26 states that is available with the FIU. The data was sourced from 187 public, private and cooperative banks across India. A bank-wise breakup of the data was not available.

The data shows that the so-called high-value transactions across the country between November 9 and December 30 amounted to Rs 7.33-lakh crore. Of this, Rs 1.13-lakh crore was deposited without Permanent Account Numbers (PAN).

PAN details, which are mandatory for deposits above Rs 50,000, help detect tax evasion and fraud.

Experts say the demonetisation decision was so sudden that it left banks with little time to prepare, leaving gaps in enforcement of regulation.

“So, some elements surely misused the system as we saw in many cases,” MM Joshi, ex-chairman of Central Board of Direct Tax (CBDT), told Hindustan Times.

“In the past also we have found many instances in which banking officials were party to opening of fake accounts.”

Spiking deposit base

The six states reported the maximum spike in deposits above Rs 2.5 lakh, accounting for Rs 2.3-lakh crore in deposits. Of this, Rs 55,000-crore came in without PAN details.

The spike in the deposit base of these states after demonetisation has been significant.

For instance, the maximum number of high-value deposits was made in Maharashtra (Rs. 1.1-lakh crore). But the state already had a substantial bank deposit base at Rs 6.51-lakh crore on November 7.

Compare this with Rajasthan: High value amounts totalling Rs 50,000-crore were deposited within 50 days of demonetisation. The deposit base of banks in the state on November 7 was Rs 1.16 trillion.

Another pattern that emerged from the data accessed by HT showed that deposits in three conflict zones---Jammu and Kashmir, Chhattisgarh and the Northeast --- were consistent with their deposit bases.

This possibly belies government apprehensions that these insurgency-hit regions were used to push fake Indian currency and unaccounted-for money.

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