Black money still floats despite RBI's currency withdrawal drive

NEW DELHI: The Reserve Bank of India’s drive to weed out pre-2005 currency notes does not appear to have helped flush out much black money from secret vaults as it shredded notes worth less than Rs 15,000 crore till June.

Although the central bank had said while launching the exercise in January that it was aimed at reining in counterfeit notes, some experts also saw it as an effort to flush out black money.

The value of notes collected and shredded as part of the drive in the first six months, however, make the exercise appear rather routine. RBI shredded 6.18 crore 1,000 rupee notes amounting to Rs 6,183 crore, 10.98 crore Rs 500 notes worth Rs 5,594.95 crore and 30.106 crore Rs 100 notes equal to Rs 3,010.6 crore till June-end.

The central bank had announced withdrawal of all currency notes printed prior to 2005, after which security features on notes were overhauled and new marks introduced to curb the menace of counterfeiting.

Among other features, the notes printed before 2005 did not mention the year of printing on the reverse side. In 2013, over one lakh Rs 1,000 and nearly 71,000 fake Rs 500 notes were seized.

RBI had put in place a new process of reporting and detection of counterfeit notes by banks.

Alongside, it also introduced measures to safeguard the interests of people coming across such counterfeit notes unknowingly. To exchange more than 10 pieces of Rs 500 and Rs 1,000 notes, non-customers were asked to furnish proof of identity and residence to the bank branch they exchanged notes at.

The last date for exchanging notes was subsequently extended till January 2015. The notes continue to be a legal tender but have to be exchanged with the notes of newer series.

The notes so collected are shredded as part of the process put in place by the central bank in line with global practices.

Until 2001, the soiled and torn currency notes that were taken back were incinerated. But now, such notes are shredded and sold as briquettes that are turned into calendars, paperweights and souvenirs.