RBI’s announcement to withdraw old-series currency notes is not an attempt to demonetise but to rationalise notes with better security features. But people with big stash of cash in lockers need to worry. Here’s why...
The Reserve Bank of India’s move to withdraw currency notes issued before 2005 is going to be a major exercise for the banking sector. It will kill two birds with one stone: rationalisation of currency notes with better security features and flushing out of unaccounted money stored in bank and personal lockers. People across the country will have to exchange 36,984 million pieces of notes issued before 2005, which is valued at Rs 3,61,229 crore .
The RBI move
What’s the latest RBI measure involving currency notes?
After March 31, 2014, the RBI will completely withdraw from circulation all bank notes (10, 20, 50, 100, 500 and 1,000 rupee notes) issued before 2005.
What's the public supposed to do with notes issued before 2005?
If you're holding such notes, you should approach the bank and exchange them for post-2005 notes. From April 1, 2014, you should not accept such notes from others and if you're still holding pre-2005 notes, you will be required to approach the nearest bank branch and exchange them. Banks will provide exchange facility for these notes until further communication.
Does it mean pre-2005 notes won't be accepted after March 31?
The RBI has clarified that the notes issued before 2005 will continue to be legal tender. This would mean that banks are required to exchange the notes for their customers as well as for non-customers. The deadline for exchange without curbs is July 01, 2014. After this, to exchange more than 10 pieces of 500 and 1000 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.
How can you identify notes issued before 2005?
You can easily identify the notes to be withdrawn. The notes issued before 2005 do not have the year of printing on the reverse side — at the bottom centre.
Why is the RBI withdrawing the notes?
RBI Governor Raghuram Rajan has gone on record saying this is not an attempt to demonetise — divestment of monetary value — the rupee ahead of the general elections. The Reserve Bank says the rationale is to remove these banknotes from the market because they have fewer security features compared to banknotes printed after 2005. It