Explainer: What is the Amit Shah-linked bank controversy all about?

On Friday, a story that had been circulated by the IANS newswire was first published and then either altered or taken down by several news organisations with no explanation given. That alone would be enough to raise eyebrows. But the episode was all the more curious because it related to an article about deposits shortly after demonetisation in a bank in which Bharatiya Janata Party President Amit Shah is a director. Scroll.in has sent queries to the news organisations that pulled the story down or changed it and is yet to receive replies from them. But beyond the questionable media behaviour, there is also the matter of what IANS reported in the first place.

What is the background?

The IANS report is based on Right to Information replies received by an activist from Mumbai regarding currency notes collected by banks during demonetisation, the government’s move in November 2016 that required all banknotes of Rs 500 and above to be deposited into the banking system so that they could be replaced by new notes.

The policy was intended to be an attack on black money. The idea was that people holding on to illicit cash would either choose not to deposit it for fear of being caught or would return it and have to pay penalties. But demonetisation also came with a huge disruption to the economy, with many reporting that clever accountants were finding ways around the rules for those with black money – even as the bulk of law-abiding citizens were stuck in lines waiting to deposit their savings and then faced a severe cash crunch afterward.

What is the story?

The RTI replies received by Manoranjan S Roy, according to IANS, showed that one district cooperative bank in Ahmedabad – which has BJP President Amit Shah as a director – received as much as Rs 745 crore of withdrawn banknotes after the move had been announced. This was the highest amount of deposits in any district cooperative bank. Second on that list was the Rajkot District Cooperative Bank, which included as chairman Jayeshbhai Vitthalbhai Radadiya, a cabinet minister in the BJP-run Gujarat government. That bank received Rs 693 crore withdrawn notes in the first five days.

Moreover, the RTI replies revealed that the amount of withdrawn notes deposited in those two banks dwarf the amounts received by other ones, such as the apex Gujarat State Cooperative Branch, which received just Rs 1.11 crore.

What is the implication?

Just five days after Prime Minister Narendra Modi announced the note ban, the Reserve Bank of India decided that no District Central Cooperative Bank, also known as DCCBs, would be allowed to accept demonetised notes. Although the central bank did not explain its move, the popular belief was that Know Your Customer norms at these institutions were lax and would allow black money to easily be laundered, defeating the purpose of demonetisation. In light of this, the receipt of a massive amount of Rs 745 crore in one district cooperative bank within five days of the note ban would seem unusual. There is no illegality implied in the RTI reply, but the amounts involved bring up questions about why the numbers at the bank were so much higher than in others.

The Congress, naturally, jumped on the information, and especially the link to Shah and other BJP leaders, alleging that the unusual volumes had some link to the saffron party also becoming tremendously rich over the last year.

In its press statement on the matter, the Congress added to these allegations pointing to a number of other DCCBs in Gujarat with BJP connections. “19 months post ‘Modi Made Disaster’ of Demonetisation, it is now officially clear that this entire exercise was the Biggest Scam in Independent India, indulged to convert its ill-gotten ‘Black Money’ into ‘White’!” said Randeep Surjewala, Congress leader, according to the statement. The party did not, however, explain how it was arriving at this conclusion.

What about the clarification?

The National Bank for Agriculture and Rural Development, which oversees DCCBs and had sent the RTI reply to the activist, issued a clarification on Friday afternoon, seeking to add context to the story. It pointed out that the Ahmedabad bank was a very successful one, seeming to imply that high deposit volumes at the institution was not unusual.

It said that 98.66% of accounts in the Ahmedabad bank received deposits of less than Rs 2.5 lakh each. Of all the accounts in the bank, not just the ones that saw deposits, NABARD said that just 0.09% received deposits of more than Rs 2.5 lakh each. It also claimed that the average deposit amount at the Ahmedabad Branch was Rs 46,795, lower than the average across DCCBs of Gujarat. It also sought to add context about the branch itself, saying has total business levels of more than Rs 9,000 crore and is one of India’s top DCCBs.

These numbers do add context to the statistics revealed in the RTI reply, but they do not serve as anything of a clean chit or a denial. Indeed, the NABARD release does not deny the fact that the Ahmedabad cooperative bank received the highest amount of money of any DCCB, although it seeks to blunt that information by saying that when combined, Maharashtra district cooperative banks overall received more demonetised notes than those in Gujarat. It also said that NABARD conducted “100% verification in Ahmedabad DCCB which revealed that the bank had complied with all the KYC Guidelines of the RBI while accepting the demonetised notes”.

Where does that leave us?

Despite the RTI information and the NABARD statement, very little is clear about the story. What we do know is that the Ahmedabad DCCB, which lists Amit Shah as a director, received what seems like a disproportionate amount of demonetised notes in the five days after the note ban announcement. NABARD has attempted to contextualise this information, suggesting it is a highly successful DCCB. But in doing so raises further questions about the small number of accounts in which huge amounts of money were clearly deposited.

Meanwhile, the Congress, taking its cue from the manner in which the BJP often spread corruption allegations in 2013, jumped from this information straight to claiming that Amit Shah “made a whopping Rs 745 crores” without any evidence to that effect. The party has also sought to connect the episode to the Jay Shah allegations, by which a company owned by the BJP president’s son was alleged to have seen a massive spike in revenues the year after Modi came to power.

The Congress’ intentions are evident. Demonetisation is perhaps Modi’s most significant decision and though it is widely believed to have failed, the move is still not seen as a political liability for the BJP. The Congress is attempting to use this episode to insinuate that the BJP used demonitisation to launder its own illicit cash.

But neither the RTI information nor the NABARD clarification offer the full picture. This unfortunately fits into the general trend of very little about demonetisation or its aftermath being understood or subjected to scrutiny. Both the RTI and the clarification add some information, but they still present an incomplete image of what exactly was happening in district cooperative banks before the RBI decided to stop them from accepting deposits of old notes.