RBI to withdraw currency notes issued before 2005

Live mint 23 jan 2014

Mumbai: The Reserve Bank of India (RBI) on Wednesday said it will completely withdraw from circulation all bank notes issued before 2005, without elaborating on the reason but assuring there was no reason to panic.

These notes can be identified easily as these notes do not have the year of printing mentioned on them, RBI said in a statement. The currency notes will have to be exchanged at banks from 1 April. The facility will be open in all banks till further notice, RBI said. The central bank, however, cautioned that from 1 July, “to exchange more than 10 pieces of Rs.500 and Rs.1,000 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.”

While clarifying that the notes issued before 2005 will continue to be legal tender, “the Reserve Bank has appealed to the public not to panic. They are requested to actively co-operate in the withdrawal process.”

The RBI is withdrawing currency notes issued prior to 2005 to ensure that the notes in circulation are of similar design. “Prior to 2005 we had different colour of notes like Rs500 notes were in blue, yellow and green. Since then there has been a single Mahatma Gandhi series issued, so this withdrawal will ensure rationalization of the notes in circulation,” an RBI official said, requesting anonymity.

Bankers said notes issued in more recent years have stronger security features, which help check counterfeiting. While the RBI regularly adds new features to notes, some of which are publicised while others are not, one notable feature introduced in 2006 was the anti-xeroxing security feature in the Rs50, Rs100, Rs500 and Rs1,000 notes.

“Notes before 2005 could have some secret features that the counterfeiters have got to know and sorting out counterfeited notes could be a problem area for RBI,” said the chairman of a large bank who did not wish to be named. “The latest notes may still be impregnable because of higher security features.”

The RBI has a clean-money policy that mandates dirty notes to be replaced with cleaner notes. According to bankers, the latest withdrawal could be more to do with this clean money policy. According to the RBI’s annual report, around 14.1 billion soiled bank notes (20.4% of notes in circulation) were processed and removed from circulation during 2012-13.

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