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Originally published by The New Indian Express, deleted without explanation.

MUMBAI: A district cooperative bank, which has Bharatiya Janata Party (BJP) President Amit Shah as a director, netted the highest deposits among such banks of old Rs 500 and Rs 1,000 notes that were abruptly demonetised on November 8, 2016, according to RTI replies received by a Mumbai activist.

The Ahmedabad District Cooperative Bank (ADCB) secured deposits of Rs 745.59 crore of the spiked notes -- in just five days after Prime Minister Narendra Modi made the demonetisation announcement. All the district cooperative banks were banned from accepting deposits of the banned currency notes from the public after November 14, 2016, -- five days after demonetisation -- on fears that black money would be laundered through this route.

According to the bank's website, Shah continues to be a director with the bank and has been in that position for several years. He was also the bank's chairman in 2000. ADCB's total deposits on March 31, 2017, were Rs 5,050 crore and its net profit for 2016-17 was Rs 14.31 crore.

Right behind ADCB, is the Rajkot District Cooperative Bank, whose chairman Jayeshbhai Vitthalbhai Radadiya is a cabinet minister in Gujarat Chief Minister Vijay Rupani's government. It got deposits of old currencies worth Rs 693.19 crore.

Interestingly, Rajkot is the hub of Gujarat BJP politics -- Prime Minister Modi was first elected from there as a legislator in 2001.

ADC bank board of directors screenshot - click to enlarge.

Incidentally, the figures of Ahmedabad-Rajkot DCCBs are much higher than the apex Gujarat State Cooperative Bank Ltd, which got deposits of a mere Rs 1.11 crore.

"The amount of deposits made in the State Cooperative Banks (SCBs) and District Central Cooperative Banks (DCCBs) -- revealed under RTI for first time since demonetisation -- are astounding," Manoranjan S. Roy, the RTI activist who made the effort to get the information, told IANS.

The RTI information was given by the Chief General Manager and Appellate Authority, S. Saravanavel, of the National Bank for Agriculture & Rural Development (NABARD).

It has also come to light, through the RTI queries, that only seven public sector banks (PSBs), 32 SCBs, 370 DCCBs, and a little over three-dozen post offices across India collected Rs 7.91 lakh crore -- more than half (52 per cent) of the total amount of old currencies of Rs 15.28 lakh crore deposited with the RBI.

The break-up of Rs 7.91 lakh crore mentioned in the RTI replies shows that the value of spiked notes deposited with the RBI by the seven PSBs was Rs 7.57 lakh crore, the 32 SCBs gave in Rs 6,407 crore and the 370 DCCBs brought in Rs 22,271 crore. Old notes deposited by 39 post offices were worth Rs 4,408 crore.

Information from all the SCBs and DCCBs across India were received through the replies. The seven PSBs account for around 29,000 branches -- out of the over 92,500 branches of the 21 PSBs in India -- according to data published by the RBI. The 14 other PSBs declined to gave information on one ground or the other. There are around 155,000 post offices in the country.

Fifteen months after demonetisation, the government had announced that Rs 15.28 Lakh crore -- or 99 per cent of the cancelled notes worth Rs 15.44 lakh crore -- were returned to the RBI treasury.

Roy said it was a serious matter if only a few banks and their branches and a handful post offices, apart from SCBs and DCCBs, accounted for over half the old currency notes.

"At this rate, serious questions arise about the actual collection of spiked notes through the remaining 14 mega-PSBs, besides rural-urban banks, private banks (like ICICI, HDFC and others), local cooperatives, Jankalyan Banks and credit cooperatives and other entities with banking licenses, the figures of which are not made available under RTI," he said.

The SCBs were allowed to exchange or take deposits of banned notes till December 30, 2016 -- for a little over seven weeks, in contrast to district cooperative banks which were allowed only five days of transactions.

The prime minister during his demonetisation speech had said that Rs 500 and Rs 1,000 notes could be deposited in bank or post office accounts from November 10 till close of banking hours on December 30, 2016, without any limit. "Thus you will have 50 days to deposit your notes and there is no need for panic," he had said.

After an uproar, mostly from BJP allies, the government also opened a small window in mid-2017, during the presidential elections, allowing the 32 SCBs and 370 DCCBs -- largely owned, managed or controlled by politicians of various parties -- to deposit their stocks of the spiked notes with the RBI. The move was strongly criticised by the Congress and other major Opposition parties.

Among the SCBs, the Maharashtra State Cooperative Bank topped the list of depositors with Rs 1,128 crore from 55 branches and the smallest share of Rs 5.94 crore came from just five branches of Jharkhand State Cooperative Bank, according to the replies.

Surprisingly, the Andaman & Nicobar State Cooperative Bank's share (from 29 branches) was Rs 85.76 crore.

While Maharashtra has a population of 12 crore, Jharkhand's population is 3.6 crore. Andaman & Nicobar Islands have less than four lakh residents.

The poorest of all the cooperative banks in the country is Banki Central Cooperative Bank Ltd in Odisha, which admitted to receiving zero deposits of the spiked currency.

Of the total 21 PSBs, State Bank of India, Bank of Baroda, Bank of Maharashtra, Central Bank of India, Dena Bank, Indian Overseas Bank, Punjab & Sindh Bank, Vijaya Bank, Andhra Bank, Syndicate Bank, UCO Bank, United Bank of India, Oriental Bank of Commerce, and IDBI Bank (14 banks) -- with over 63,500 branches amongst them -- did not give any information on deposits.

8

As soon as the demonetisation of Rs.500 and Rs.1000 notes was announced, I had said that it was a forced and public funded "bailout" of banks. This article examines news reports from the last year and explains how I arrived at the conclusion.

Please note: I am not an economist or banker or accountant or even particularly good with money or calculations. As a result, almost all the conclusions in this article are actually quoted from news reports and analysis. I have merely strung them together. I could still be wrong, feel free to argue in the comments.

As soon as the demonetisation of Rs.500 and Rs.1000 notes was announced, I had said that it was a forced and public funded "bailout" of banks. This is a phenomenon polite people call recapitalization unless the government literally dumps money into banks.

This view has not changed. But many are skeptical, saying that excessive money with banks is not good for them as they will have to lend it out in order to earn from it. That is true, and they will have to lower interests and give out more loans and such. However, to those following the news, I'm simply presenting various things that happened in the year before the demonetisation. Particularly with regard to the Non Performing Assets - NPAs. Too many NPAs and the banks won't be able to function. On the other hand... pay attention here: The bank with the largest number of NPAs - State Bank of India - doesn't seem to be in as much crisis as several others - say... Indian Overseas Bank - guess why? Because with that size come plenty of other performing assets as well as deposits keeping the show going.

For the record, it isn't the first time that the government has forced the country into actions that end up putting money in banks. The Jan Dhan Yojana was the first. It doesn't seem to have yielded much. Then came the DBTL, where in spite of the Supreme Court saying that citizens must not be deprived of their rights because of not having an Aadhaar, a convoluted scheme was imposed on them where the gas subsidies provided for the state would be provided as deposits into their bank accounts as opposed to people paying less for gas while buying it. Small amounts at a time, but it would end up totaling to a good amount of money belonging to citizens getting deposited into the banks by the government. People were free to withdraw it, but at least some of it would hopefully remain as deposited, just like some Jan Dhan accounts would indeed see use even if most remained empty. But these are old stories.

The NPAs of banks had increased to an alarming level by the end of the December quarter, last year. Then governor of RBI, Raghuram Rajan had been on the case of banks for NPAs for a while, and took a firm view of the matter, giving the banks until March 2017 to deal with their NPAs. Banks were to start flagging and resolving NPAs and restructured loans and by March, skeletons were tumbling out of banking closets and it was clear that the banks had been underplaying NPAs in order to show better results to investors (presumably). With the pressure on from the RBI, the banks started turning the heat on defaulters. It is no secret that it is banks with large corporate loans struggling the worst with NPAs, and I can only speculate that people who knew people who knew people had a lot of money at stake. To quote from the linked article:

RBI had conducted an asset quality review of Indian banks and found many accounts that were showing stress were required to be classified as non-performing. But since banks were not classifying those accounts as NPA, the banking regulator directed lenders to classify them as sub-standard and provide accordingly. Sub-standard assets attract 15-20 per cent provisioning as compared to five per cent provisioning requirement in standard assets.

RBI had asked the banks to complete the exercise of classifying assets as NPA in the third and fourth quarter.

As a result, many banks including the likes of Bank of Baroda, IDBI Bank, Bank of India suffered record losses in the Oct-Dec quarter. Since the remaining accounts (those which were not classified as NPA in Q3), need to be classified as NPA in Q4, losses could her mount. Bankers said this has prompted the banks to call the management of the defaulting companies and ask them to make payments, which will help the lenders avoid further losses.

Incidentally, this is around the time when Narendra Modi claims that planning for demonetisation started (although there doesn't seem to be much evidence of planning going by the manner in which it has been carried out).

Soon after this began noises of Raghuram Rajan not continuing as the governor of RBI after his tenure was complete. What happened behind scenes is anyone's guess and rumors and claims out in public range from Raghuram Rajan not wanting to continue to the government not wanting him to continue. Regardless, he was succeeded by Urjit Patel, who headed GSPC in Modi's Gujarat when GSPC took loans to the tune of 20,000 crore and basically had nothing to show for them, with no gas ever being produced. His closeness to Ambani (who profited majorly from the GSPC mess) as well as Jignesh Patel is well known. So, given Modi's preference for complete incompetence in area where competence is expected being a requisite for appointments, who better than Urjit Patel to head RBI while it was overseeing banks reducing NPAs?

Unlike Raghuram Rajan's approach, where the RBI would support banks in dealing with bad loans, Urjit Patel was of the view that "bad banks" take over the debt. It is unclear what happened of that approach or whether and what efforts continued toward NPAs, but they continued to rise. Attempts by Modi (and one wonders why Modi) to get Indian state owned firms to take over floundering defaulting companies (and their debt) failed a month before demonetisation was declared by Modi. To quote from the link:

India's government is pushing state-owned steel, power and shipping firms to take over assets of private companies that have defaulted on loans, but faces resistance from them, leaving it scrambling to clear a $135 billion pile of stressed loans from banks' books.

[...]

Last month, steel ministry officials met with Modi to outline measures to revive a sector reeling under bad loans and cheap Chinese imports. Days later, in a renewed push, Finance Minister Arun Jaitley met with top lenders, including State Bank of India (SBI.NS) and ICICI Bank (ICBK.NS), steel and shipping ministry officials and some state-owned companies.

He gave the state-owned firms a list of 23 troubled steel, power and shipping companies with bad loans totaling $14.5 billion, according to government officials and minutes of the meeting seen by Reuters.

The state-owned firms were "encouraged" to buy at least one asset and take a minority stake in a company on the list.

The banks needed lots of money and fast, or many of them being Public Sector Banks with the government owning more than half of them, it would stress the government for funds. One wonders what was wrong with turning the screws on NPAs harder. The banks needed money and fast.

How could this be achieved? Well, how about if all the people in India put most of the money they had into banks and left most of it there?

What followed, with demonetisation seems to be a harebrained scheme to get most of the cash with the country into banks. This is how not only do the banks not have enough cash planned and are not even in a position to provide enough cash in the near future, we have increasing noises about "cashless" transactions being an intent behind the demonetisation. So the money gets transferred from account to account, but remains with the banks instead of returning to the people with limits withdrawn and notes available again.

Then with demonetisation with banks bloated with funds, some of the staggering NPAs were "written off" to reduce their burden and free the money the banks would have to provision for the bad loans. Any taxes the government got would be a bonus (but given the expenses and waivers of demonetisation, I doubt these were the real motive).

Added feedback from someone who knows more about money than me: While the increased deposits will allow the banks to lend more, earn more, lower interest rates, etc, the interest earned by the banks and taxes to the government will no doubt be useful toward recapitalizing the banks. As will various confiscations of deposits be.

So now the thoughtless demonetisation with it unending new rules being pulled out of hats has happened. Banks have a different problem. Too much cash. And the methods to deal with it won't necessarily result in big profits for them. What they will do to existing loans with the economy and thus borrowers stressed far worse is anyone's guess.

Finally, how do I know that this is really a bank bailout and not a coincidence? Well, now that things are going south with the demonetisation, the usual process of protecting Modi from the consequences of his own action has already begun. From being "Freedom at Midnight" - Modi's project planned meticulously and in complete and necessary secrecy for 10 months, the story now is that the RBI and Finance Ministry presented the demonetisation plan to Modi in a manner that "turning down the scheme was out of the question". And guess why (emphasis mine):

Prime Minister Narendra Modi is working “more than ten hours a day” just on ensuring that the 8 November money measures announced by him ensure a smooth landing for the economy rather than turbulence. This despite the fact that the plan actually owed its origin to the Reserve Bank of India and the Ministry of Finance, who persuaded the PM to go forward with an idea which will affect (and has affected) over a billion citizens of this country. Prime Minister Modi showed moral courage in coming forward and accepting ownership of the currency swap scheme announced on 8 November, and has since then publicly backed every twist and turn in that policy by the monetary and fiscal authorities. Senior officials say “Prime Minister Modi was presented with the issue in such a way that turning down the scheme was out of the question”. Through the plan, concerned officials wished to “shield those in high positions in banks across the country from the consequences of the crony-oriented lending that they had been doing, specially since 2006”, the year when Narasimha Rao’s liberalisation policy was fully substituted by the UPA into a faux Nehruvian economic policy that combined Fabian socialism with Wall Street ways. “Officials argued that a windfall of up to Rs 550,000 crore would flow to the banks through the enforced extinguishing of currency notes issued by the RBI, and that this would recapitalise several banks that were in effect bankrupt, thereby allowing them to lend again”. The Prime Minister was assured that “steps would be taken to ensure that the common man suffered minimal discomfort” and that “the informal economy would accelerate its absorption into the formal without jobs being affected”. It needs to be mentioned that it is the formal sector that is responsible for not repaying bank loans of a value crossing Rs 750,000 crore, which will be several times the value of tax evasion by the informal sector. NPAs are being written off by banks at an accelerating pace over the past six years, with still more businesses declaring themselves unviable by the month.

I rest my case.