The Reserve Bank of India (RBI) on Wednesday decided to withdraw all currency notes issued prior to 2005, including Rs 500 and Rs 1,000 denominations, starting March 31. The step was aimed at curbing black money and fake currencies in the country.
“From April 1, 2014, the public will be required to approach banks for exchanging these notes. Banks will provide exchange facility for these notes until further communication,” an advisory issued by the central bank on Wednesday said.
The size of India’s black economy is estimated to be about a third of its GDP. If hidden income of $500 billion (about 30 lakh crore) were to be disclosed and taxed at 33%, it would generate Rs 10 lakh crore, enough to fund the food programme in the country for a few years.
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Asking people not to panic and cooperate in the withdrawal process, the central bank said old notes would continue to be legal and could be exchanged at any bank after April 1.
“…banks are required to exchange the notes for their customers as well as for non-customers. From July 01, 2014, however, to exchange more than 10 pieces of Rs 500 and Rs 1000 notes, non-customers will have to furnish proof of identity and residence to the bank branch in which they want to exchange the notes,” the advisory read.
Although the RBI did not give any reason for the withdrawal of pre-2005 currency notes, the move is expected to unearth black money held in cash. As the new currency notes have additional security features, they would help in curbing the menace of fake currency.