Money & Banking
Exchanging Notes

RBI’s order to withdraw all currency notes of pre-2005 creates confusion that could be easily avoided

In a positive move, the Reserve Bank of India (RBI) has decided to mop up currency notes with lower security features which have been widely counterfeited. But the way it went about it caused a burst of initial panic. RBI needs to learn that issues which impact the aam aadmi need clear and comprehensive communication rather than bureaucratic circulars followed by multiple clarifications. Now, here are some facts that should have been communicated along with the mid-January circular to withdraw currency printed prior to 2005 (where the notes do not mention the year of printing and have less security features and, hence, are widely counterfeited).

First, RBI’s CVPS (currency verification & processing system) machines have already been withdrawing pre-2005 notes for nearly a year. The new circular is only to mop up the residual notes. This was one of the measures to counter the large number of sophisticated counterfeit notes which can be detected by only CVPS machines. It is, however, unclear why the exercise includes Rs10, Rs20 and Rs100 notes, where counterfeit or fake notes are of poor quality and easier to detect.

RBI had initially instructed banks to exchange notes only after 31st March and this set off panic among users when uninformed shopkeepers and taxi-drivers refused to accept old notes. Immediately, a brisk business of exchanging pre-2005 notes at a 2% commission sprang up in Mumbai, as reported by a local daily. Following a clarification by RBI, banks are now exchanging pre-2005 currency without a murmur. Our sources also tell us that bank ATMs will not dispense old currency notes.

By announcing a positive and pre-planned move on the eve of a general election, without adequate public information, RBI caused needless confusion. Governor Raghuram Rajan had to use his post-credit policy press briefing on 28th January to clarify that the currency clean up was not aimed at catching tax-evaders or attacking black money. RBI still needs to put in place a communication strategy to reach out to 300 million-plus unbanked Indians who deal only in cash. A radio campaign in local languages and a programme to work with banking correspondents to facilitate the mop up of old currency must be put in place well before 31st March to avoid another round of confusion and exploitation of those who have limited means.

User

COMMENTS

Hemant

3 years ago

I fully agree with you.People are more confused then clear about same.Just two days back i withdraw money from ATM & i got all old 1000 Rs. notes,which in present days,was difficult to use ,hence i had to visit my bank & ask for replacement.The cashier says,these are valid notes & moreover he shows me new ten bundles of 10 Rs.note,which were printed before 2005,received by him from RBI.He said & i agree with him, that presently they are more under pressure because of this confusion created circular.

REPLY

Vinay Joshi

In Reply to Hemant 3 years ago

Declining to accept 'legal tender'is an offence under prevailing law.

I refuse to believe that the said bank cashier was having pre 2005 notes as sice many years banks are supposed to remove them from circulation.

Secondly RBI ntfn states that after April 1,2014 till June 30,2014 bank branches will exchange the notes. Another aspect 50K & above exchange will require PAN as is the norm as of now also.

Regards,

Hemant

In Reply to Vinay Joshi 3 years ago

I had withdrawn 1000 Rs notes from Indian bank ATM,which were old & had seen pre 2005 notes of 10 Rs,shown to me by cashier,whom i knew since years & trust her.you have every right to refuse,what i had stated:)& i have no intention to harass other layman under pretext of prevailing law,to accept old notes ,that of 1000 Rs,as it was easy for me to get it change from my bank.

Vinay Joshi

In Reply to Hemant 3 years ago

Mr.Hemant,

As per me Rs 10/- notes, pre 2005 fresh notes, can't be sent by RBI!

The exercise of withdrawing pre 2005 notes was started in 2009 by the erstwhile Guv. Dr.Subbarao.

In no way i'm challenging your statement in respect of Rs 10/- wad, do not misunderstand me. [it may have come thro' inter branch currency transfer or a deposit of another client.]

Yes, i do agree with you with your Rs1K aspect. Best aspect.

Regards,



Vinay Joshi

In Reply to Hemant 3 years ago

Mr.Hemant,

As per me Rs 10/- notes, pre 2005 fresh notes, can't be sent by RBI!

The exercise of withdrawing pre 2005 notes was started in 2009 by the erstwhile Guv. Dr.Subbarao.

In no way i'm challenging your statement in respect of Rs 10/- wad, do not misunderstand me. [it may have come thro' inter branch currency transfer or a deposit of another client.]

Yes, i do agree with you with your Rs1K aspect. Best aspect.

Regards,



Vinay Joshi

3 years ago

Hello Ms. Sucheta,

It seems you have not received any reply to your letter addressed to The RBI Guv;

In the northern region & as well in MP etc; 5/10/50 FICN's are being undetected which are in daily circulation. So much so in certain parts, two halves in small poly pouch stapled in circulation.

Secondly since 08/09 FICN's became a menace the then RBI Guv, [who else? D.Subbarao] had initiated & for last 2/3 yrs a perpetual exercise of the banks.

The fear is among the hoarders & not for the poor, illiterate.

Regards,

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FY13 GDP growth revised lower
The downward revision in GDP reflects the lower growth in the agriculture, mining, electricity and construction sectors of the Indian economy, says Nomura in a research note
 
The government revised lower FY13 (year ending March 2013) GDP growth to 4.5% year-on-year from 5.0% earlier. This downward revision reflects two factors: lower growth in the agriculture, mining, electricity and construction sectors; and an upward revision in FY12 GDP growth to 6.7% year-on-year from 6.2% earlier. This is according to a Nomura research note on GDP growth.
 
The downward revision in the FY13 GDP number should create a marginally positive base effect for the FY14 GDP growth rate. The advanced estimate for FY14 will be released next Friday (7th February) and Nomura expects real GDP growth of 4.7% year-on-year.
 
Separately, core infrastructure sector (weight of 37.9% in industrial production) growth rose to 2.1% year-on-year in December 2013 from 1.7% in November 2013. Electricity output expanded at its fastest pace, while coal, natural gas and refinery product output growth contracted, points out the Nomura research note.
 
On a three-month moving average basis, infrastructure sector output growth has started to moderate again (after a brief spurt in Q3 2013), suggesting that overall demand may be moderating again, says Nomura.
 
After two consecutive months of negative growth, Nomura expects industrial production growth to move into black in December 2013, but subdued growth in the core sector suggests that overall industrial activity remains very sluggish, the research note concludes.

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