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Slow withdrawal

Context:

The Reserve Bank of India’s recent announcement that ₹2,000 banknotes would be withdrawn from circulation has triggered a sense of déjà vu.

How is it different from 2016 Demonetisation?

The Prime Minister’s decision in November 2016, to abruptly and completely rescind the legal tender status of the then available high value currency notes was ostensibly aimed at ‘combating black money and terror financing’, while the RBI has asserted that the latest move is in pursuance of its ‘Clean Note Policy’ and does not alter the legal tender status of the withdrawn notes.

Issue:

Reports from across the country speak of consumers, including wage earners in sectors such as construction, struggling to pay for the purchase of medicines, petrol and other day-to-day essentials despite the notes continuing to remain legal tender.

Conclusion:

The RBI retains the right to issue or withdraw currency bills as it deems fit for the conduct of its policy mandate, but the lack of transparency now, and the administrative flip flops, do little to enhance trust in its “promise to pay the bearer” the note’s face value.

Clean Note Policy:

The policy was introduced in 1999 by the then RBI Governor Bimal Jalan.
It seeks to give the public good-quality currency notes and coins with better security features, while soiled notes are withdrawn out of circulation.

News Source: The Hindu

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