Soiled notes may soon be a thing of past as the Reserve Bank has asked all bank branches handling large amounts of currency to put in place note-sorting machines by the end of next month with a view to halting re-circulation of unfit currency notes.
“The Reserve Bank is committed to a ‘clean note’ policy. RBI exchanges soiled notes for clean ones, and mutilated notes for new ones subject to certain conditions,” central bank Governor D Subbarao said at the Convocation function of Sambalpur University here.
“In pursuit of our clean note policy and to check counterfeiting, we also prescribed that by March 31, 2011, all bank branches with cash receipts of over Rs 50 lakhs per day be equipped with a note sorting machine so that every high denomination currency note is checked for fitness and genuineness before being put back in circulation,” he said.
Furthermore, he said, RBI has instructed banks to ensure that the notes that they issue through their ATMs are also pre-checked for genuineness and cleanliness.
He pointed out that cost and longevity are important dimensions of currency management.
“We are a large cash economy; in fact, we are the second largest producer and consumer of currency in the world, next only to China . Producing such a large amount of currency is expensive,” he said.
Talking about introduction of plastic notes, Subbarao said, one option for economizing is replacing paper currency with plastic one as some countries such as Singapore and Australia have already done.
“We are planning to try this out on a pilot basis, starting with a plastic note in the Rs 10 denomination, which we will distribute out of five of our regional offices in the country including our Bhubaneswar office,” he said.
During the pilot phase, RBI needs to study not only the relative costs but also the carbon footprint associated with the recycling and disposal of plastic notes vis-à-vis paper notes.
“If the pilot proves successful, we will mainstream the use of plastic currency,” he said.
By far the most important facet of currency management is building in security features to prevent counterfeiting. People should be aware of these security features so that they can tell a forged note from a genuine one, he said.
This is the motivation for the awareness campaign that the Reserve Bank has launched in the print and electronic media to educate people on the security features, he said.