Taxmen begin raids on hoarders of cash as Centre, RBI pump in notes

NEW DELHI: Tax authorities have conducted 30-35 raids in Karnataka and parts of Andhra Pradesh as part of a drive to smoke out cash hoarders, even as the government and RBI moved to pump in funds into some of the states facing a currency crunch.

In Bihar, for instance, Rs 800-900 crore has been pumped in through the ATM network with initial assessments suggesting that the shortage may be tackled soon. But the problem is seen to be more deep-rooted in Andhra and Telangana, where the role of large contractors is under the I-T department’s lens.

While the amount seized in the raids conducted so far is not very large, operations are expected to gather pace in the coming days as hoarding of 2,000-rupee notes is seen to be the main reason for ATMs running dry in several parts of the country.


A senior official told TOI that the focus was on individuals and entities that have undertaken large withdrawals over the last few weeks.

Initial feedback from the two southern states suggested that the large contractors have been issuing cheques to smaller players for what was shown as subcontract. The smaller contractors, in turn, withdrew money based on the payments they received, to spend on projects.

In some cases, tax officials have discovered that no work was to be executed by the small contractors. A senior official told TOI that the focus was on individuals and entities that have undertaken large withdrawals over the last few weeks. “In some cases, the withdrawals are not justified and they do not tally with the income or spending patterns. We believe that cash is only being held with no actual spending planned in several cases,” said a source, who did not wish to be identified.

Tax authorities are also examining if some of the hoarding is related to the elections in Karnataka or even for polls in Andhra and Telangana next year, amid speculation that elections may be advanced.

The government suspects that Rs 2,000-denomination notes are being hoarded by those dealing in black money, resulting in cash shortage at ATMs in several states, including Gujarat, MP, Andhra Pradesh, Telangana and Karnataka. Although steps have been initiated to step up flow of cash, reports of cash shortages kept trickling in amid claims by officials and banks that several ATMs were beginning normal operations.

Executives with ATM operation companies said that they were focusing on refilling the cash dispensers with Rs 200 and Rs 500 notes, but cassettes for the smaller denomination currency notes had not been fitted in all machines so far. Smaller denomination notes, however, meant that replenishments needed to be quicker.