RBI and the currency notes

The Reserve  Bank of India (RBI) recently announced that currency notes issued before 2005 will not be acceptable for circulation and the public should exchange the same with the banks before April 2014.  However, within two days from the date of the announcement, the apex bank came out with a topsy-turvy reversal  stating that the public can, even after July  1, can exchange it through their respective bank accounts. It may not be surprising if RBI releases yet another statement that the pre-2005 notes will continue to be valid and the status-quo would prevail.

Why RBI not adhering to the original deadline of March 31, 2014?

Ensuing Lok Sabah polls is public knowledge. The sleeping currency bundles lying with the politicians and the political parties will awaken to find their locations in the hands of the voters as “freebies”.  If RBI implements April 2014 deadline, the public will pounce and bounce at the Parties  for ‘giving’ them the ‘invalid’ notes which would backfire on their political prospects. “We don’t want your notes, and you will not have our votes”, the repressive response the parties would apprehend. Perhaps, is that the reason, RBI has extended the deadline to July and beyond?

Make no mistake, RBI and the Government are one and the same.  It is like CBI, Election Commission et.al. Though they are independent entities, they are Central Government’s one or the other organs of the same body. They will dance to the Centre’s tunes.

The pre-2005 currency notes will not feature the “Gandhi” image and the year of printing.  This, in addition to unearthing the black money, has been cited as the reason to withdraw the pre-2005 notes.  The common man, by and large, will not  be holding the pre-2005 currency notes.

Where will they be?  Undoubtedly, with the politicians and the political parties.  The RBI notification need not panic the aam aadmi (no pun, please). Or may be those coin collectors, like stamp-collectors may hold it is a hobby, which would only increase its numismatic value. 

What is the status of  black money stashed in Swiss banks?

Pertinent it is to recall that the Congress party in its 2009 election manifesto  yelled at its campaign  to bring out the stash money in Swiss banks.  A term of five years has gone by.  Will they clarify what efforts have they taken to dig out the illegal funds?  In the interim period, the black money sharks cunningly hijacked it to other countries.   In fact, the Swiss government had furnished the details of those account holders and the amount held by them, to the Central   Government.

“Indian banks, led by the public sector, have accumulated sticky loans of over Rs 6.5 lakh crore till the end of 2013….” (Times of India, Jan. 24, 2014). And now, this announcement  of withdrawal of pre-2005 notes is to unearth “local” hoarding of dirty money!  There could be a sudden spurt in spending of unaccounted money.  Recent reports indicate the currency involved could be over Rs.11,000 crore.  Even  a conservative estimate of 30 per cent of it could be “dark”, and there can be pressure to declare or spend.

If eradication of black money is the true intention of the government/ RBI, they should have stuck to the deadline of March 31, 2014.  Will they do? A big NO. Why? Because where will the Congress party go to ask for election funds?

RBI should make it mandatory to deposit at least higher denominations like 100, 500 & 1,000 of pre-2005 be deposited in the respective bank accounts and issue new/post-2005 notes through cheques/withdrawal forms.  This is a better way to expose the black money.  Also, as transactions of Rs.50,000 and above warrant PAN No., you can expect from now on deposits of 49,000 or less in several tranches to avoid scrutiny.

Identify the pre-2005 and post-2005 notes and ensure exchange of notes before deadline.