New Delhi, January 19, 2017

Income-tax authorities are said to have uncovered an anomaly afflicting cooperative banks following demonetisation. Deposits shown on their books are in excess of the physical stock of old Rs 500 and Rs 1,000 notes held, giving rise to speculation about possible irregularities.

Several such instances have come to the department's notice in cooperative banks located in Jaipur, Rajkot and Pune. Fearing that the problem could be more widespread, the investigative wing of the income-tax department has informed the Reserve Bank of India.

"There have been instances where physical currency was less than what was reported in books," a senior income-tax department official told ET.

The situation came to light after the tax authorities conducted a survey in one case and intercepted a van carrying cash that belonged to a cooperative bank, the official said. In one case, the books showed an amount of Rs 242 crore while the physical currency was Rs 100 crore less.

The cases have so far been limited to cooperative banks but tax authorities are now keeping a close tab on the data from scheduled commercial banks on deposits and withdrawals to keep a check on the use of official channels for laundering.

There are fears the problem could be more widespread. There have been concerns that holders of black money may have used various avenues to launder cash. It will be recalled that cooperative banks were excluded from the demonetisation exercise.

Meanwhile, there have been several reports of the Enforcement Directorate investigating cooperative and other banks after large numbers of accounts were opened and money deposited into them following demonetisation.

RBI has not yet disclosed the amount of withdrawn currency that has been deposited because the number needs to be verified, given possible wrongdoing, the need to eliminate double counting and weed out fake currency.

RBI governor Urjit Patel declined to put a number on total deposits during his appearance before a parliamentary committee on Wednesday.

On November 8, the day Prime Minister Narendra Modi announced demonetisation, Rs 500 and Rs 1,000 notes worth Rs 15.44 lakh crore were in circulation. The government said old notes had to be deposited by December 30.

Banks have been asked to furnish data about deposits exceeding Rs 2.5 lakh made in the November 9-December 30 period, more than Rs 10 lakh in a year in any account and cash payments of Rs 1 lakh or more toward credit card dues as authorities look to crack down on laundering.

The official cited above said tax authorities had come across instances where multiple accounts were opened without any 'know your customer' (KYC) credentials.

The Central Board of Direct Taxes has instructed financial institutions including cooperative banks and post offices to seed all accounts without KYC credentials with income-tax permanent account numbers (PAN) by February.

[The Economic Times]