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Double counting of deposits ruled out (Relevant for GS Prelims, GS Mains Paper III)

Bankers of apex bank denied the possibility of double counting:
Bankers and former central bank officials assert there is virtually no scope for the figures on deposits of withdrawn high-value banknotes released by the Reserve Bank of India to be inaccurate on account of ‘double counting’.

RBI only looks at the currency chest data and the notes that were deposited at the RBI counters.”

Background:
Economic Affairs Secretary Shaktikanta Das had flagged the possibility that the Rs.12.44 lakh crore figure reported by the central bank could be higher than the actual amount of withdrawn currency deposited with the banking system since the November 8 demonetisation announcement due to double counting.

Data verification:
 “Specified Bank Notes (SBNs) of Rs.500 and Rs.1,000 returned to RBI and currency chests amounted to Rs.12.44 lakh crore as of December 10, 2016,” R. Gandhi, Deputy Governor of the RBI, had said on December 13.

What are Currency chests?
To facilitate the distribution of banknotes and rupee coins, the Reserve Bank has authorised select branches of scheduled banks to establish Currency Chests. These are actually storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank.

Possibility of double counting:
The possibility that double counting may have taken place is suggested by some economists who have said that some banks, which do not have their own currency chest, may have deposited the withdrawn notes in a chest of another bank. This in turn could have led to both, the bank making the deposit and the bank tallying the deposits made at the chest, reporting the same figures separately to the central bank, they claim. There are many banks, particularly private sector and cooperative banks, that do not have their own currency chests.

Background:
As on November 8, the value of banknotes that ceased to be legal tender from the next day was Rs.15.44 lakh crore, according to the government.Banks had started to accept deposits of these notes from the public from November 10. The Centre had expected Rs.10 lakh crore to come back into the banking system, as per the Attorney General’s submission to the Supreme Court last month.

What is Double Counting? Double counting in accounting is an error whereby a transaction is counted more than once, for whatever reason. But in social accounting it also refers to a conceptual problem in social accounting practice, when the attempt is made to estimate the new value added by Gross Output, or the value of total investments.

 



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