The Reserve Bank Wednesday announced it would withdraw after March 31 all currency notes issued before 2005, including those having higher denominations of Rs 500 and Rs 1,000.
To avoid panic, it said the notes would continue to be legal, and the public would have time to exchange them for new notes. However, they should not be used for transactions from April 1.
“We expect people to go to bank branches to return the notes and take fresh ones,” said an RBI source.
According to the RBI, such pre-2005 notes are a small fraction of the total currency in circulation. The RBI spokesperson said the move should not be conflated with demonetisation of high value notes.
“A demonetisation would have meant a sudden deadline and possibly demanding an explanation for the source of the money tendered at the banks. We are aiming for nothing of the sort,” the spokesperson said.
The only time the RBI had gone in for demonetisation was in 1978 when notes of Rs 1,000, Rs 5,000 and Rs 10,000 were withdrawn.
Bankers said the RBI has advised them to expand their currency chest operations to handle the rush, especially in non-metropolitan areas.
Currency experts have long demanded that the RBI should streamline the number of variations in its currency notes. The central bank too said Wednesday’s move was aimed at such rationalisation to ensure that only later versions with enhanced security features were in circulation.
The RBI said after April 1, people would need to approach scheduled commercial banks to exchange these pre-2005 notes. Banks will exchange these notes until further communication, the central bank said in a statement.
“Public can easily identify the notes to be withdrawn as the notes issued before 2005 do not have on them the year of printing on the reverse side,” the RBI said. Appealing to the public “not to panic”, the central bank said “they are requested to actively co-operate in the withdrawal process.”
“This would mean that banks are required to exchange the notes for their customers as well as for non-customers. From July 01, 2014, however, to exchange more than 10 pieces of 500 and 1,000 rupee notes, non-customers will have to furnish proof of identity and residence to the bank branch in which she/he wants to exchange the notes,” the RBI said.
The withdrawal is also a part of the RBI’s general emphasis to wean people away from using cash to cards or bank-based transactions. India has the highest amount of cash in circulation among the major economies of the world, excluding the USA.
There were 4,299 million pieces of 1,000 rupee notes continued…