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RBI RELEASES ITS ANNUAL REPORT FOR 2017-18

WHERE’S THE ILLEGAL CASH?

The Reserve Bank of India in its annual report has said Rs 15.31 lakh crore out of the total Rs 15.41 lakh crore demonetised currency have returned to the banking system. The central bank said 99.3 per cent junked notes were deposited in banks, while 0.7 per cent notes worth Rs 10,720 crore couldn’t be traced.

HERE ARE THE MAIN POINTS RELATED TO DEMONETISATION THE RBI HAS HIGHLIGHTED IN ITS ANNUAL REPORT FOR 2017-18

The value of banknotes in circulation increased by 37.7 per cent over the year to Rs 18.03-lakh crore at endMarch 2018. The volume of banknotes, however, increased by 2.1 per cent. This is in sharp contrast to the government’s push for digitisation and a less-cash economy.

BIG VALUE CURRENCY INCREASED

In value terms, the share of Rs 500 and Rs 2,000 banknotes, which together accounted for 72.7 per cent of the total value of banknotes in circulation in March-end 2017, increased to 80.2 per cent in March-end 2018.

FACTS

-150+ deaths
-5000+ crore 4 printing new notes (If 16Lac crore INR, equal 500/2000 bills)
-No drop in Terrorism, Stone-pelting, Naxalism
-60 changes in 43 days
-No big black money hoarder arrested
-99.3% money returned

LOT OF FAKE NOTES DETECTED

One of the aims for demonetisation was to fight the fake currency problem. According to the RBI data, 522,783 pieces of counterfeit notes were detected in the banking system in 2017-18. Of the total fake notes detected, the share of such notes detected by the central bank was higher at 36.1 per cent in 2017-18 as compared to 4.3 per cent during the previous year.

PRINTING NOTES WAS COSTLIER

The total expenditure incurred on security printing during the FY18 stood at Rs 4,912 crore as against Rs 7,965 crore in 2016-17, says the RBI. The amount was higher in FY17 due to demonetisation, which forced the RBI to print more new notes

GROWTH DRAG

In a series of tweets, former finance minister P. Chidambaram said economic activity was hit due to the cash ban and millions lost their jobs
The cash ban cut India’s GDP growth rate by 1.5 percentage points, translating to a loss of 2.25 trillion rupees a year, Chidambaram said. More than 100 lives were lost in the panic to exchange old notes for new ones, millions of daily-wage earners lost their livelihood for several weeks, thousands of small and medium enterprises were shut down and many jobs were destroyed

ECONOMIC RECOVERY

The RBI in its annual report said it expects the economy to expand at 7.4 percent in the financial year to March 2019 and inflation to pick up pace.
The RBI appears confident that the domestic economic recovery is well entrenched with various indicators suggesting that economic activity has continued to be strong.

RBI LISTS THESE 5 ECONOMIC CHALLENGES IN LATEST ANNUAL REPORT

Rising inflation: One of the key factors mentioned in the report is related to rising inflation. The report indicated that headline inflation may face upside risks in the remaining portion of the year.
The apex bank mentioned in its report that headline inflation, which clocked an average of 4.8 per cent in Q1 2018-19, is likely to rise amid rising in global commodity prices such as crude oil, weakening rupee which hit a new low against the dollar today and other developments around financial markets in the world.
Demonetised currency: The RBI report also revealed that 99.30 per cent of the demonetised Rs 500 and Rs 1,000 notes have come back. The top bank said: “The value of banknotes in circulation increased by 37.7 per cent over the year to Rs 18,037 billion as at endMarch 2018.The volume of banknotes, however, increased by 2.1 per cent.” It may be noted that before November 8, 2016, Rs 500 and Rs 1,000 rupee notes worth Rs 15.41 lakh were in circulation and out of that, Rs 15.31 lakh crore was returned to the RBI.
Bad loans: The RBI has also warned against rising bad loans. The latest report predicts that the number of bad loans may rise in 2018-19.
As of now, the bad loans in the banking sector is at around 11.5 per cent.“Going forward, the stress tests carried out by the Reserve Bank suggest that under the baseline assumption of the current economic situation prevailing, the gross NPA ratio of scheduled commercial banks may increase further in 2018-19,” the report highlighted.
GDP growth: The annual report has also projected the GDP growth for the year 2018-19 at a robust 7.4 per cent. While this remains unchanged from the August monetary policy, the growth will be driven by foreign investments, consumption and exports. However, for the real GDP growth to inch higher, there is a need to boost industrial production and also to reduce overall borrowing. Thus, the economic growth on GDP terms will be dictated by policy reforms.
Global trade environment & crude oil price: Another factor that may affect the Indian economy in future is the worsening global trade scenario, triggered by a series of protectionist policies. Not to forget the rising price of crude oil and increased demand, which has led to a sharp spike in India’s import bill.