The Story of RBI’s Missing Billions

RBI's figures on the number and value of new notes it has put in circulation do not add up. The discrepancy is of more than half a trillion rupees. Is RBI trying to deceive people by claiming to print more notes than it actually did? Or is the RBI, under the new governor, too inept to get its figures right?

After demonetising the old Rs. 500 and Rs. 1000 notes, the RBI claims to have issued new notes worth 5.93 lakh crore. If we calculate the net value of the notes printed and issued by RBI, – as per their various press notes – we can account only for Rs. 5.27 lakh crore. More than half a lakh crore rupees – Rs. 63,000 thousand crore to be exact – are missing from the 5.93 lakh crore amount.  Simply put, RBI's numbers just do not add up.

In December, RBI began releasing data on return of the old demonetised notes to the banking system, and also publishing data on the number and value of fresh notes issued to replace the old notes.

In a press note released on December 7th, (Interestingly, RBI's 7th December's press release has now been taken down) the RBI gives a break-up of the currency notes made available to the public between November 10th and December 5th. According to this, currency worth a total of Rs. 3.8 lakh crore has been issued out in this period. Rs.1.06 lakh crore was in notes of smaller denominations – the total number of these notes is 19.1 billion. The remaining amount comprised of Rs. 2000 and Rs. 500.

Again, on December 22nd, RBI released a press note, with a new set of figures.  According to the December 22nd note, between November 10th and December 19th, the central bank – the RBI -- released currency worth total of Rs. 5.93 lakh crore to the public. The new press note also said that this amount was made up of 20.2 billion currency notes of smaller denominations, and 2.2 billion notes of higher denominations.

This means that, after December 7th, RBI gave out an additional 1.1 billion currency notes of smaller denomination (20.2 billion minus 19.1 billion). Even if, we were to assume that all these additional notes are in denomination of Rs.100, this would mean and addition of Rs. 0.11 lakh crore. This works out to a total worth of all smaller denomination notes issued as on December 22nd as Rs. 1.17 lakh crore: Rs. 1.06 lakh crore as per December 7th press note plus Rs. 0.11 lakh crore.

Out of the Rs. 5.9 lakh crore that RBI claims to have issued till December 19th, if Rs. 1.17 lakh crore is of smaller denominations, then Rs. 4.73 lakh crore would need to be in notes of higher denominations (Rs. 5.9 lakh crore minus Rs.1.17 crore).

RBI's December 22nd press note states that it released 2.2 billion currency notes in high denominations. Even if all these notes were released in only Rs. 2,000 denomination, it totals up to only Rs. 4.4 lakh crore;  Rs. 33,000 crore remains unaccounted (Rs.4.73 lakh crore minus Rs. 4.4 lakh crore)

In fact, the missing money is likely to be much higher. We know that RBI has been releasing Rs. 500 notes along with Rs. 2,000 notes – even if in smaller amounts. In response to an unstarred question raised in Rajya Sabha on the composition of newly printed notes, the Minister of State for Finance, Arjun Ram Meghwal, on 6th December in a written answer provided figures that indicate that about 9% (in numbers, not values) of the newly printed notes supplied up to 29th November were in 500s, the rest in 2000s.

If we consider that 10% of the new notes of high denomination are now Rs. 500, and 90% are Rs. 2,000,  this works out to 0.2 billion as the number of Rs. 500 notes and 2 billion as the number of Rs.2,000 notes. This makes for a total of value of these notes to be Rs. 4.1 lakh crore: Rs. 4 lakh crore in 2000s and Rs. 0.1 crore in 500s.

The big question is, what happened to the remaining Rs. 63 thousand crore (Rs 4.73 lakh crore minus Rs. 4.1 lakh crore), which RBI claims to have issued to the public?

Is RBI trying to deceive people by claiming to print more notes than it did?  

Or is the RBI, under the new governor, too inept to get its facts and figures right?