Why not take this as the golden opportunity to introduce polymer currency notes of Rs500 and Rs1,000 in a single move?
Every now and then couriers and "mules" are caught carrying fake Indian currency notes. However, quantity and frequency have increased recently, as per reports appearing in the press. Investigations by various related agencies have come to the sad conclusion that these originate from Pakistan. Supplies via Nepal and Bangladesh were regular; this was increased due to the presence of large Indian expatriate population in the Gulf. Now reports indicate that Cambodia (Kampuchea) is one more point of distribution from where the fake currency finds its way to India.
Therefore the present move by the Reserve Bank of India (RBI) to replace the old currency notes minted before 2005 has to be viewed from different angles. First is the fear that "foreign hands", especially Pakistan, can cause havoc by pushing the supplies of these fake Indian currency notes in circulation that may be designed to be supplied to groups which can create problems before elections that are due in May.
Secondly, the genuine reason is to reduce the replacement cost of currency notes, which do not have a long shelf life; at best these last for four to five years, as compared to polymer notes, which are practically permanent and not easily copied or made. Counterfeiting polymer currency note is just not possible, as countries like Australia, the pioneer, has not reported any case so far. Besides, replacement costs are nil.
The world treasuries are reported to be printing about 150 billion bank notes every year to replace the old, worn out and torn notes, at an estimated cost of $10 billion, and it is not always practical carry metallic coins, which are also in circulation, side by side, but for smaller denominations. Technically, the reason for shorter life span of the paper currency notes has been attributed to human sebum, the oily, waxy substance secreted by the sebaceous glands that prevents hair and skin from drying out! Two researches in the US—Nabin M Lawandy and Andrei Smuk of Solaris Nanosciences Corporation—found out that the frequently handled currency notes become grimy due to human sebum! When they carried out further studies, they came up with a supercritical CO2 which acts both like a gas and a liquid commonly used for "cleaning" applications! This will take further research and trials before it can become functional on a large scale!
Anyway, RBI has announced the procedures to be followed for replacement of old currencies (pre 2005) from 1st April onwards, till 30th June, simply by contacting the individual bankers where one has the account.
After 1st July, there are no restrictions on lower values, where one has the account, but upto 10 notes of Rs500 and Rs1,000 denominations and exchange them for new notes. In case of other banks, if one should carry more than 10 note of Rs500 and Rs1,000 denominations, they need to produce ID and residence proof from 1st July onwards. In case of doubt, banks can be contacted for assistance.
The RBI has given the assurance that this move is not intended to or aimed at demonetising the currency, and actually being done to replace the old (pre 2005) which were easily counterfeit able. The new notes are more difficult to counterfeit according to RBI. Though the BJP party called this move as "anti-poor" and as a gimmick of the finance ministry, stating that people who have no bank accounts will be hard hit, RBI officials confirmed that this was done to protect the public and that there is no need to panic because of the proposed introduction of new currency notes.
All said and done, and taking full face value of the reasons given by RBI for this new notes, why not take this as the golden opportunity to introduce polymer currency notes of Rs500 and Rs1,000 in a single dramatic move? Such move will kill several birds in one stone! Elections are around the corner and fake currencies from across the border is bound to be flooded to cause havoc, and this can be avoided by this single major move - or at least, reduced to a great extent!
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)