RBI extends deadline to exchange pre-2005 notes to June 30, 2016
Reserve Bank of India (RBI) has extended the deadline for exchanging pre-2005 currency notes of various denominations by another six months to June 30, 2016.
From January 1, 2016 such facility for exchanging pre-2005 currency notes will only be available at identified bank branches and Issue Offices of the RBI.
Earlier in June 2015, RBI had set the last date for public to exchange pre-2005 banknotes notes as December 31, 2015. It is fourth time RBI has extended the deadline for exchanging pre-2005 currency notes since March 2014.
Till date RBI has shredded over 164 crore pre-2005 currency notes of various denominations, including of Rs 1,000 with the face value of around Rs 21,750 crore in its regional offices.
Reasons for withdrawing pre-2005 notes from circulation
- Security: pre-2005 notes have fewer security features as compared to 2005 and post-2005 currency notes. Thus, lesser will be the chances of its counterfeiting newer currency notes. It will also remove fake currency notes in circulation which were being pumped in Indian economy were copies of pre-2005 notes.
- Flushing out black money: The spillover effect of the RBI’s decision will be to flush out black money. Money has value only as long as it is a medium of exchange and store of value. It loses its value when it ceases to be a medium of exchange.
- A disincentive for cash hoarders: With the RBI’s announcement, currency hoarders will be left with no option but to liquidate their unaccounted holdings by spending or exchanging them. Thus, this is a well thought out exercise by the RBI to capture the “money flows’’ into the system and also help flush out counterfeit notes.
- International standard practice: It is an international standard practice to remove old series notes.