Demonetisation may wipe out the present stock of black money held in cash from the economy but cannot eliminate the ill-gotten wealth converted into assets such as gold and real estate, Assocham said on Tuesday.
However, the industry body has suggested measures like lowering stamp duty on property transactions to tackle the menace. "Invalidating existing high-denomination notes addresses the stock of black money but does little to address future flows. Eliminating such flows will require further reforms like lowering stamp duty on property transactions, electronic registration of real estate etc," the Assocham study said.
Moreover, it said, indications that most of the scrapped currency has returned to the banking system through right or wrong means do suggest that demonetisation may not even fully wipe out the existing stock of ill-gotten cash.
"To that extent, even our study may turn out to be ambitious if the tax authorities are not able to trace the money laundered through different accounts. Given the resource constraints with the tax authorities, carrying out such an exercise for identification of laundered money may be a herculean task," Assocham Secretary General D S Rawat said.
The study pointed out that high denomination currency withdrawal is not without some inherent problems.
"It is very difficult to separate black money from white money because distinction is not once-and-for-all. White money used to purchase something becomes black if the shopkeeper does not pay sales tax," the study noted, adding that much of conspicuous consumption is paid for in unaccounted money, which, in the hand of the recipients can again become perfectly legal income.
Ultimately, the problem of undisclosed incomes and wealth has to be tackled at the source, Assocham highlighted. "Government must reduce the opportunity and incentives for unaccounted transactions by narrowing the gap between the market value and the one fixed by the government agencies for different levies like stamp duty etc," Rawat said.
Many PSU banks may skip dividend payout this fiscal
Hit by demonetisation and mounting bad loans, some public sector banks (PSBs) may skip paying dividend which will have implications for government receipts in the current fiscal.
Some PSU bankers have already indicated to the Finance Ministry that it may not be possible for them to pay dividend as their profits are likely to remain subdued due to lower credit offtake and rising NPAs, sources said without specifying the names of the banks.
As a result, they said, it is expected that the revenue from dividend from public sector banks is likely to be less than Rs 1,000 crore as many banks are going to skip dividend payment this financial year.
Gross NPAs of PSBs rose to Rs 6,30,323 crore at the end of September 30, as against Rs 5,50,346 crore by June, 2016.
According to analysts, normal banking operation was hit for almost two months due to demonetisation leading to decline in income operation of banks. The credit offtake hit a record low of 5.3 per cent following note-ban.
At this point of time, it seems difficult proposition that banks would be able to pay dividend this year when all of them are seeking higher capital, sources said.
Last fiscal, as many as 16 PSBs, including PNB, BoB and Canara Bank, skipped paying dividend in 2015-16, leading to three-fold decline in government receipts to Rs 1,444.6 crore.
Only six state-owned banks including SBI declared dividend, though at a lower rate, for the financial year ended March 2016.