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RBI Governor allays concerns on withdrawal of pre-2005 notes
Says new notes more secure; move not related to coming elections
Sanjeev Sharma
Tribune News Service

New Delhi, January 23
Reserve Bank of India (RBI) Governor Raghuram Rajan today said the move to withdraw all bank notes printed before 2005 is not aimed at de-monetisation. His remarks came amidst a major buzz around the challenges the massive exercise may entail.

Finance Ministry sought recall The Finance Ministry sought withdrawal of the pre-2005 notes, the RBI Guv said The RBI on Wednesday said it will withdraw from circulation all notes issued prior to 2005 after March 31 From April 1, the public will be required to approach banks for exchanging these notes

"This is not an attempt to demonetise (completely stop using the currency). It is an attempt to replace less effective notes with more effective notes. I understand people are making different interpretations. Unfortunately, that should not be the interpretation," he said. The BJP has already called the move a gimmick.

Rajan was answering a question posed by CBI Director Ranjit Sinha after he delivered the 8th RN Kao Memorial Lecture here. Sinha had asked him about the significance of the decision coming before the General Election. "I have to say that it (withdrawal of notes) has nothing to do with elections," Rajan said. The RBI Governor said there has been a long standing demand that these notes have unfortunately become less secure. The notes after 2005 have greater security features and the Finance Ministry sought withdrawal of the pre-2005 notes. Although the RBI has asked the public “not to panic”, there is already intense analysis of probably the RBI’s biggest recall of notes of all denominations. Several questions are being posed as to what this exercise will entail for the general public.

The biggest issue confronting the public is that since all notes printed before 2005 will have to be exchanged after March 31, people are already searching for such notes in their wallets, lockers and elsewhere as the case may be and wondering whether they should stop accepting such notes in their day-to-day activity.

The other issue is that of the time given for this recall with around two-and-half months left till March 31. Covering the length and breadth of the country, all towns and villages and spreading awareness of this exercise may be a daunting task.

Also, this is a bit like inviting the whole country to the bank. Leave alone the black moneybags that are being targeted, there may be a lot of such notes in general circulation. How many people will go to the banks, how long the queues will be and what kind of manpower will have to be involved at the bank level is another matter. This also brings the issue of those who are unbanked and do not understand banking procedures. India as an economy has huge unorganised and cash segments, especially for the non-salaried labour segment. For those having big sums of black money, they will either have to invest it somewhere like gold, real estate or financial instruments or put it in the bank before the deadline because after that exchanging large denomination notes would require ID and residence proof.

The move to withdraw notes has been criticised by the BJP.