Black & White Game

Demonetisation and its Inside Story

Amitava Choudhury

Demonetisation started with an address to the nation by the Prime Minister on the evening of 8 November 2016. People all know that. People can guess that before taking this decision, he might have consulted some others. But that might not have been the case.

The process of lighting the evening lamps starts with the rolling of the wicks in the morning, wrote Rabindranath Tagore. The rolling of the wicks for demonetisation, too, could have begun much earlier.

The nationalised banks had played a major part in the game of demonetisation. Because it was they who took in the scrapped currency notes and gave out the new ones. In order to understand their actual role, one must have an idea of the process of appointment of the bank chiefs. The chief executives of the banks are their fulltime directors. They are appointed under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980. A government order dated 13 April 2011 lays down the revised guidelines for such appointments approved by the appointments committee of the Cabinet, whose salient points are:
1.   General managers of nationalised banks and chief general managers of associated banks of the State Bank of India who have completed two years of service and have three years of service left shall be considered eligible for applying for the post of executive director.
2.   The cut-off date for determining eligibility will be reckoned as on 1st April of the financial year in which the vacancies arise.
3.   A panel must be prepared for appointment having 25 percent more number of candidates than the number of vacant posts. The panel shall be valid till the end, i.e., 31 March, of the financial year concerned.

But, what happened in the financial year of demonetisation, i.e., 2016-17? In accordance with the rule, taking 01.04.2016 as the cut-off-date, 47 candidates were reportedly called for interview for the post of executive directors for appointment in the year 2016-17. After the interview, some of them were selected. A few months passed and suddenly in late September a notice was issued saying that some other candidates had been selected too. It did not conform to the revised guidelines of 2011. For, the number of names in the panel thus went beyond the 25 per-cent excess limits. So, the September appointments were absolutely irregular. In these circumstances, an application was filed under the Right to Information Act on 7 October seeking to know the details of these appointments. There has been no reply till now. Meanwhile came the much-discussed announcement on the night of 8 November that 500 and 1000-rupee notes had become invalid and had to be exchanged within a stipulated time. The banks, particularly nationalised banks, were to play a crucial role in respect of exchange of the currency notes. The nationalised banks must have started preparations for playing this role much earlier. It becomes clear from a letter from the finance ministry written in September, two months before demonetisation. The letter was written by a finance ministry official of deputy secretary rank to the MDs and CEOs of all nationalised banks. It asked them to send names of general managers suitable for the post of executive director. But the date for determining eligibility would be 01.10.2016. They were further told to exclude the names of eligible candidates sent earlier, taking 01.04.2016 as the cut-off date. It is clear from this letter that a list had been sent earlier taking 01.04.2016 as the cut-off date in accordance with the rules and now a new list would be prepared making 01.10.2016 the cut-off date, which is absolutely outside the rules. Two other features of the letter are worth noting. Although the whole letter is typed, its date, the 12th, is written by hand. It also contains a line in bold letters saying that the list must be e-mailed the same day to a given ID. So, one might guess that the person who signed the letter did not know when to send it and kept it typed without putting the date. However, it is clear that the appointments had to be made on an urgent basis and hence it was directed that the list must be mailed on the very day of receiving the letter. And the reason for this urgency is also apparent from the new cut-off date—01.10.2016. It indicates that now someone or some people needed to be made executive directors who did not meet the eligibility criteria if 01.04.2016 was taken as the cut-off date but fulfilled them if the bar was reset at 01.10.2016. The need, it seems, was to appoint 'competent' people for carrying out the all-important demonetisation.

There is another piece of news in this context. There were sudden operations in 4,30,288 dormant accounts across the country between 9 November and 22 November and Rs 6,400 crore 51 lakh were deposited in 500 and 1,000-rupee notes. Since each deposit was below Rs 2 lakh, these did not come under income tax department's investigation according to the declared policy of the government. After a few days, the money was withdrawn through Net banking. Even in today's networked world, it is not only difficult but almost impossible to get the necessary information about all dormant accounts in the country without the top executives of the banks playing any role. But it can definitely be said that although depositing money in someone else's account would not normally be considered a crime, withdrawing money from others' accounts is a criminal offence.

If the events discussed above are arranged in chronological order, one will see: (1) At the beginning of the 2016-17 financial year, executive directors were appointed in nationalised banks from among 42 general managers and some posts were left vacant. (2) Again, in September, nine among 18 general managers who could not meet the eligibility criteria within the deadline were made executive directors. (3) On 7 October, an application was filed seeking the details of these appointments under the Right to Information Act. No reply has been received yet. (4) On 8 November, the Honourable Prime Minister addressed the nation regarding the scrapping of 500 and 1,000-rupee notes. (5) Between 9 November and 22 November, scrapped notes were deposited in 4,30,288 dormant accounts, without exceeding Rs 2 lakh in each case. (6) The scrapped notes thus deposited added up to Rs 6,400 crore 51 lakh. (7) All this money was withdrawn through electronic transfer.

For one thing, each illegal or irregular act facilitates more such acts. In this case, too, the September appointments were made to obtain a detailed list of all the dormant accounts and carry out this massive operation through them without any trouble. Everyone in the list might not have been involved in the operation, but only an investigation will reveal who were involved. The whole thing will become clear if one knows in which banks the transactions took place. And since the money was withdrawn through Net banking, it will not be difficult to find out where it went finally and who actually owned it.

Moreover, the Reserve Bank has now disclosed that 99 percent of the scrapped 500 and 1,000-rupee notes have come back to the banks. This way or that it becomes evident that the main intention of demonetisation was not blocking black money but making black money white.

But will there be an investigation? The ultimate responsibility of those appointments would lie on the appointments committee of the Cabinet. The committee has only two members—the Prime Minister and the home minister.

Concerned people may seek a CBI inquiry under the supervision of the Supreme Court which can perhaps throw some light on this exercise called demonetisation, for which Honourable Prime Minister had been so eager.

Vol. 50, No.37, Mar 18 - 24, 2018