His comments came after the RBI in its annual report said that 99.3 per cent of the Rs 15.3 lakh crore taken out of circulation in November 2016 has returned to the central bank.
He referred to the annual report of the RBI a year ago which said at that time that most of the notes were counted but the process was not complete. The SBNs received were verified, counted and processed in the sophisticated high speed CVPS (currency verification and processing system) for accuracy and genuineness, and shredded and briquetted in the shredding and briquetting system, it said.
Political parties were quick to corner the BJP-led Narendra Modi government that demonetised high-value currency notes to curb black money.
In March 2017, the share of Rs 500 and Rs 2,000 currency notes, in value terms, accounted for 72.7% of the total value of banknotes in circulation.
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The RBI said the processing of SBNs has since been completed. "I suspect that the bulk of the currency (Rs 10,720 crore) was in Nepal and Bhutan and some of that was lost or destroyed".
Former finance minister P Chidambaram claimed that more than 100 lives were lost and lakhs of jobs were destroyed due to closure of businesses after demonetisation. For instance, the SBI's economic research department, headed by chief economist Soumya Kanti Ghosh, predicted that up to Rs 2.5 lakh crore wouldn't come back into the banking system. "In consonance, the use of digital payments, which had surged to a peak in December 2016 in the aftermath of demonetisation, fell back to the elevated post-demonetisation trend before rising in recent months", the RBI notes. The thinking behind this theory was that if a certain amount of the demonetised currency didn't come back into the system - if it was dumped in a river or burnt to ashes because its owners were afraid of being caught with black money - it would reduce the RBI's liabilities.
"Whether demonetisation has failed or not depends on its objective". Meanwhile, the central bank may soon come up with varnished notes to increase their lifespan, which would not only reduce replacement requirement but would also save the central bank from security printing expenditure. "The currency in the system now is 87-88 per cent, that is about Rs 3-4 lakh crore less currency than it would have been if the system would have continued in the old manner", he said.
"The value of banknotes in circulation increased by 37.7 per cent over the year to Rs 18,037 billion at March-end 2018", it said.
"The notes issued increased by 26.93 per cent from Rs 15,063.31 billion as on June 30, 2017 to Rs 19,119.60 billion as on June 30, 2018", the report said.