The other day, to my surprise, the bus conductor refused to accept my 100 rupee note saying something about a missing year. To my relief, my usual veggie seller promptly accepted it, unaware RBI’s notice of withdrawal of pre 2005 currency. He could at most keep it till March 31, 2014 the date till which it will be acceptable. Holding on to it beyond July 1, 2014 would have him go marching to his bank branch (assuming he has an account), waiting in long queues to exchange it for a new note, one which was issued after 2005, with better security features, reducing possibility of counterfeit. Little is he aware that if he possesses more than ten pieces of such 500 and 1000 notes, he is expected to possess address and identity proof and submit it to the bank, and thus get his dues. Vegetable wholesellers from whom he buys too would be lucky to find a nearby rural branch adequately staffed and also stocked with new notes. After all, banks have been known to face shortage of staff to deal with huge walk-ins resulting in long queues. Further, the limited number of branches in rural and semi-urban areas will perpetuate the problem.
Similar could be the fate of India’s massive underground network of financial couriers (Angarias), who are estimated to conduct over Rs. 1,000 crore a day in undocumented cash transactions. It will also hit the illiterate sections and those ignorant of the change. The withdrawal of pre-2005 currency although acceptable for legal tender will create panic among its users. No wonder the aware and literate bus conductor was so mindful! Property dealers, gold sellers and other hoarders of cash would be exchanging their currency through dealers inorder to avoid becoming accountable for huge cash transactions. So, welcome the class the dealers, once again!
The step taken by RBI is in view of the rising problem of fake notes being detected in the system and reducing the possibility of counterfeiting. Funding of terror networks with fake currency and triggering of inflation needs to be definitely taken care of. The move was also in response to 2 lakh fake notes worth 10.14 crore recovered in August 2013. Central banks, the world over, periodically phase out old currency and introduce ones with better security features. At least seven countries, Australia being the first, have switched over to polymer notes which are made from a thin, transparent and flexible film made of polypropylene. The life of such notes is 2.5 times longer than paper banknotes. Bank of England would be issuing such notes from 2016 and RBI seems to be taking baby steps towards it. We only wish that banks are able to handle this pressure and ensure a smooth journey for the common man.
Contributed by Prof.Mani Govil (Faculty, IBS Mumbai)