PM Jan Dhan accounts to come under scrutiny for suspicious ₹2000 deposits

The period from May 23, 2023, to the end of September 2023, when the ₹2,000 banknotes are withdrawn from circulation, will be a time when banks closely monitor Pradhan Mantri Jan Dhan Yojana (PMJDY) /Basic Saving Bank Deposit (BSBD) accounts for any odd deposits.

To curb tax evasion and money laundering, tax authorities are set to scrutinise mass cash deposits, particularly in PMJDY accounts, amid concerns that these accounts may have been used for concealing wealth during the demonetisation period. The move comes as artificial intelligence and data analytics are deployed to detect unusual high-value purchases and deposits, especially with the September deadline for invalidating ₹2,000 notes.

The RBI's decision to withdraw ₹2,000 banknotes from circulation has prompted heightened scrutiny of the financial transactions involving these high-value notes. Given the potential for misuse or illegal activities, the focus has turned towards the deposits made into PMJDY accounts, as they have been recognised as a preferred avenue for directing government subsidies and welfare benefits to the underprivileged.

According to a 2017 RBI report, after the demonetisation of ₹500 and ₹1,000 denomination banknotes in 2016, a large amount of these SBNs (specified bank notes) flowed into the following special types of accounts: Basic Saving Bank Deposit Account (BSBDA); PMJDY Accounts; Kisan Credit Card (KCC); dormant or inoperative accounts; co-operative banks' accounts with Scheduled Commercial Banks; bullion trader/jewellers' accounts; and loan accounts.

Following the demonetisation exercise of 2016, nearly 99.3 per cent of the currencies demonetised were returned to banks. Jan Dhan accounts, often held by individuals from poor backgrounds, were suspected of playing a role in facilitating money laundering for unscrupulous wealthy individuals.

Before the over-the-counter exchange mechanism at bank branches was shut down on November 25, 2016, roughly ₹37,000 crore of SBNs were tendered, as reported in a 2017 Mint Street Memo titled "Demonetisation and Bank Deposit Growth" written by RBI officials Bhupal Singh and Indrajit Roy.

Tax authorities and banks are on high alert for suspicious account transactions, and banks have been instructed to follow cash transaction reporting and suspicious transaction reporting norms, including compliance with Know Your Customer (KYC) norms and other applicable statutory requirements.

Artificial intelligence and data analytics will aid in identifying abnormal and unexplained deposits, particularly of ₹2,000 notes, raising suspicion of tax evasion.