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Q. Need to investigate high spurt in deposits: In the backdrop of demonetisation, discuss the need to investigate the unusual high spurt in bank deposits.
Nov 25, 2016 Related to : GS Paper-3

Ans :

Introduction-
The decision of demonetisation has been announced on announced on 8th of November. But it has been observed that a steep increase of Rs 4.8 lakh crore in bank deposits in September over the August figure. Such high spurt in deposits has been observed ahead of the demonetisation, hence it needs to be inquired into, to rid the demonetisation drive of a possible taint in the form of suspicion that some people took advantage of insider information. 

Analysis-

  • Opposition parties were blaming government, but it would be strange, indeed, if those in the know of a move planned six months ahead waited till September to act.
  • Information could have leaked out, if it did leak out, from the RBI or the printing presses. The matter calls for investigation and an explanation.
  • Spurt observed in September might be on account of disbursal of Pay Commission arrears, Spectrum auction proceeds and some bunched subsidy payments.
  • It is not a difficult task to establish if anyone took advantage of prior information of the demonetisation move and converted high-denomination notes into small-denomination ones. 
  • As RBI keeps track on flow of big and small notes between the banks, if there is any break in inflow and outflow, in the first half of the current fiscal year, in the pattern of flow of big notes into, and of small notes from, the central bank, it would indicate foul play. 
  • If the pattern is the same from April 2014 onwards, that would rule out mischief and prior information about demonetisation. 
  • It would be in the government’s interest to initiate an inquiry on this issue, and check if any foul played. 

Conclusion-

Both government and RBI made it crystal clear that, the information about demonetisation was not leaked anywhere. As it has been witnessed the high spurt in deposits, but spurt is also due to various reasons like pay commission disbursal, but still it there is need of investigation in this matter. Investigating the issue of high spurt in deposits is in the interest of the government as well as people.

 


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