- Foreign exchange Black money hoarders have converted crores of demonetised notes into forex. Dollars are the most sought after currency. A dollar costs around Rs 120-140 in old demonetised notes. Even some diplomats are involved in this laundering process.
- Hawala There are reports of people sending their black money abroad through hawala dealers, who are again charging a high premium to park it in foreign currency in Dubai, Singapore and Malaysia.
- Bullion The easiest way to launder money. Many have heavily invested their dirty money in buying bullion, jewellery and diamonds, which wont attract tax.
- Real Estate Though there is no investment coming into this sector, some small time developers have doubled up as launderers offering their banking networks and influence to convert black money.
- Politicos There are many dealers—including small-time politicians —who are changing old notes by charging a huge cut. E.g, Rs 1 crore of old notes can be changed for Rs 70 lakh in new currency.
- Petrol Pumps They could accept old currency till November 24 and as per reports several of them have aided in cleaning black money.
- Hospitals While many private hospitals shooed away patients resulting in some deaths, others used the window of opportunity to accept demonetized currency to launder black money.
- Nepal-Bhutan There are reports of demonetised notes being smuggled to these countries with porous borders. With use of Indian currency common in these countries, government has made a provision whereby old notes can be exchanged.
- Tribal areas People have been caught trying to dispose of their old notes in tribal areas of Northeast including Nagaland, Manipur and Arunachal Pradesh since they have tax exemptions. Generally, money transactions take place here without questions asked.
- Jan Dhan Black money operators have used these accounts of poor people to park their unaccounted money. Thousands are under Income Tax department’s scanner.
It is for a reason that the RBI has denied permission to cooperative banks to exchange demonetised currency despite pressure from state governments. These banks, intended to help at the grassroots level, has become a black hole for malpractices.
These banks are mostly extensions of cooperative societies (with banking licenses) dominated by political heavyweights, whether in UP, Maharashtra or Kerala. “As soon as the cooperatives are allowed to swap old notes for new, the whole purpose would get defeated. Even though they have licences they can’t be forced to behave like nationalised banks as they are registered under the Societies Registration Act,” said a politician. Most of these banks aren’t computerised, so they could issue back-dated fixed deposit certificates to help launder black money.
In Maharashtra, on November 9 and 10, cooperative banks were exchanging demonetised currencies. But deposits of about Rs 600 crore with no records forced the RBI to stop the exchange of currency. Earlier too, many of these banks were found indulging in frauds in collusion with sugar mills to pocket loan waivers without any benefit accruing to poor farmers, the intended beneficiaries.
Soon after setting up a bank, it forgets its primary function of helping the farmer and instead, in direct competition with nationalised banks, it takes on banking activities like personal loans and vehicle loans. This attracts those who have made black money in real estate dealings. These banks offer higher interest for deposits and also don’t ask the source of the unaccounted money.
When the Income Tax department and the RBI ask questions, there is fierce political resistance. This was why TDS was made mandatory in 2004-05. Banks even refused to share details with the RBI. Black money accounts for an estimated 40 per cent of the total deposits, mostly held in benami accounts.
Cooperatives have a pyramid structure with the chairman and the cooperative minister controlling the operations. In UP, Aditya Yadav, son of Shivpal Singh Yadav and nephew of Mulayalam Singh, is the chairman of UP Pradeshik Cooperative Federation. Similarly, in Maharashtra, NCP leader and former union minister Sharad Pawar and former Maharashtra CM Ashok Chavan have dominated the cooperatives.