Demonetisation: Is RBI goof up responsible for it?
Did the Central government demonetise Rs 1,000 and Rs 500 notes to fix an error by the Reserve Bank of India press last year? The RBI had printed 300 million defective notes of Rs 1000 and 100 million of them had already been in circulation, according to a report in The Hindu on January 1 this year.
The currency notes were printed and circulated without the windowed security thread which read ‘Bharat’. This thread is a key feature of RBI notes to verify authenticity. These defective notes went into circulation in the Maharashtra region, according to reports and most RBI staff from the other region did not know about it. Though an RBI official said it is impossible for the RBI to send defective currency for circulation, this mysterious circulation occurred, according to reports in The Hindu and India Today.
Reports say that these defective currency notes were printed in the Nashik Currency Note Press (CNP) in Nashik. The papers to print the currency were supplied by the Security Paper Mill in Hoshangabad.
Two senior officials of the mill were suspended on January 8 over production of thousands of defective currency notes. Manager H K Vajpayee and deputy manager Ravinder Singh posted at SPM’s new bank-note paper line (NBNPL) were suspended on the recommendation of a five-member inquiry committee appointed by the Union finance ministry.
NBNPL is a new unit of the Security Paper Mill started by the NDA government under their flagship programme – Make In India. It was inaugurated by Finance Minister Arun Jaitley in June 2015. But the RBI told the PTI that the value of the defective currency notes did not exceed Rs 5 lakh. The Hindu and India Today reports said it was more than Rs 10,000 crore, quoting their sources in the RBI.
RBI gave instructions to the banks to replace those defective currencies if found, and announced that they were going to release new banknotes in the denominations of Rs 500 and Rs 1,000 incorporating three new/revised features.
It is said that the RBI failed to replace the defective currencies and it gave rise to a scenario where people cannot distinguish between the fake notes and the defective ones. This may be one of the reasons for the authorities to scrap the currencies and introduce new ones.