“Demon”etisation – How bank employees found a way around the note ban

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“Where there’s a will there’s a way.” This is a proverb a number of us have grown up with, never truly understanding its importance in our daily life. While we might’ve ignored this proverb, a number of our bankers seem to have been inspired by it, finding ways to go around the note ban. A recent report has stated that over 100 bank employees have been suspended for “mismanagement” of funds during demonetisation. While the RBI has itself filed a number of FIRs against bank employees, it remains to be seen whether these individuals will face any heat.

Prime Minister Narendra Modi’s decision to ban currency notes of Rs.500 and Rs.1,000 denominations created panic in the country, with those hoarding black money in a quandary over their illegal wealth. While most bankers worked overtime to meet demand from the public, a few did so in order to make deposits, not into the bank’s account but their personal ones. It is no secret that the demonetisation drive brought out the entrepreneur in us, with thousands finding a way to convert black money into white, filling their coffers in the process.

The grey area – For life isn’t all black and white

The move might’ve had a good intention, but the execution left a lot to be desired. Millions of us were impacted by the cash crunch, and while the RBI has eased withdrawal norms, normalcy is yet to return to the country. Enterprising bankers found a grey area in this battle between black and white, coming up with certain ingenious means to convert black money.

  • Incomplete KYCs – Demonetisation saw thousands of Indians rushing to banks to open accounts. Given the rush it was natural for a few KYC forms to be incomplete. Any money deposited in these accounts would be converted into a Demand Draft. While genuine cases were present, a number of bank employees created such accounts, converting black money into white demand drafts.
  • A number of bankers found themselves in a soup for aiding money conversion
    A number of bankers found themselves in a soup for aiding money conversion
  • Fake accounts – There were multiple instances of fake accounts being opened by providing false credentials. In many cases bank authorities were confronted about this, but no serious action was taken. Thousands of crores were deposited under fake accounts, not only in small banks, but also big players in the Indian context.
  • Suspense accounts – This might be the first time you’re hearing of this account, but for greedy bankers there was no suspense at all. A suspense account is nothing but a temporary account which is used when a banker is unable to classify an account into a particular category. Money will be transferred from this account once all verification is done. Unscrupulous bankers would classify certain new accounts as suspense accounts, moving the converted money into proper accounts later.
  • Backdated FDs – While normal people invest in FDs to save for the future, politicians and other money launderers found fixed deposits to be a convenient way to convert their black money into white. Backdated fixed deposits were opened in multiple cases, with money deposited in them not only becoming legal, but also earning interest, marking the cherry on top of this cake.
  • Loan foreclosures – This might not be the most easy way to convert money but it was used by quite a few people. Involving a lot of input from bank employees, individuals who wanted to convert their black money would approach people who had availed loans against gold from banks. By offering to foreclose the loan, this black money went back to the system. Recovering their money was now upto launderers, who would have had to wait a while before getting it back.

Demonetisation was supposed to flush out the black money in our country, but almost the entire amount has been deposited into banks, proving that individuals found a way around this move. While a few hundred bank employees have been caught for “aiding” this conversion, it remains to be seen what happens to the big fish. Will the government go out and nail them or will it be a silent spectator in this open game of hide and seek?

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