Anybody with currency bundles stashed under the mattress may need to check them. The Reserve Bank of India has said that banknotes issued before 2005 will be completely phased out after March 31 and replaced with new ones, in a move that could counter black money and help weed out fake currency circulating through the system. Starting April 1, “the public will be required to approach banks for exchanging these notes,” the central bank said in a release on Tuesday.
“Banks will provide exchange facility for these notes until further communication.” This doesn’t mean notes issued before the cut-off date won’t continue to be legal tender, the Reserve Bank clarified.
“Banks are required to exchange the notes for their customers as well as for non-customers,” the central bank said. From July 1 onward, however, things could get more interesting at bank counters. “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,” RBI said.
The central bank has helpfully urged the public not to panic and to “actively co-operate in the withdrawal process.” RBI said there was nothing out of the ordinary about the measure. “Globally, it is a practice across central banks to phase out banknotes at regular intervals,” said an RBI official requesting anonymity.
“The design and security features of the notes have been changing regularly. These are old series notes which need to be phased out of the system.” Identifying the notes to be withdrawn is easy – they are those that don’t have a year printed on them. “The notes issued before 2005 do not have on them the year of printing on the reverse side,” the central bank said. The move should help in catching counterfeits.
As of March 2012, as many as 5 lakh fake notes had been detected in the banking system, a 31% jump from the year before. In its annual report, RBI asked banks to ensure that the notes they receive over the counter are sent back into circulation only after they being properly authenticated.