Pakistan’s central bank is currently engaged in an exercise to demonetise and replace old bank notes with new ones but the process has been largely painless, as compared to the drive underway in India.
The process has been underway for the past 10 years, and the State Bank of Pakistan (SBP) said in a statement on November 2 that old design notes in the denomination of Rs 10, Rs 50, Rs 100 and Rs 1,000 will cease to be legal tender from December 1.
The old notes can be exchanged at commercial banks across the country till November 30. After that, the old notes can still be exchanged at SBP Banking Services Corporation field offices till December 31, 2021.
The process of demonetising the old notes has been gradual – the government first phased out Rs 5 and Rs 500 notes before moving to the other denominations. The introduction of new design notes was completed in 2008.
“We had to move to new currency notes because of the large number of fake notes of various denominations, especially Rs 1,000 notes,” recalled for SBP governor Ishrat Husain.
New notes of all denominations were introduced. Syed Wasimuddin, a senior staffer of SBP, said Rs 1 and Rs 2 notes were gradually replaced with coins while the Rs 5 note was withdrawn altogether.
The new Rs 10, Rs 20, Rs 50, Rs 100, Rs 500 and Rs 1,000 notes were gradually introduced over five years. “We gave one deadline after another but the idea was that anyone with an old note would automatically be entitled to a new one,” said Wasimuddin.
In 2006, the Rs 5,000 note was introduced by the government. Shamshad Akhtar, who was the SBP governor at the time and also the first woman to hold the post, told the media that the new notes had better security features.
People generally welcomed the change. Today, even ten years after some of the new notes were gradually introduced, the public can go to any commercial bank and have their old notes replaced. In instances where a note has not been legal tender for more than ten years, notes have to be submitted to a bank and are exchanged after a couple of days. Those that have been outdated for less than ten years are changed at the counter.
SBP officials said demonitisation has been a regular process in Pakistan because it allows fake notes to be taken out of circulation. At the same time, bankers admit that some mistakes were made in terms of the design of the new notes and those were subsequently rectified.
For example, the Rs 20 and Rs 5,000 notes had a similar colour scheme and, in a country such as Pakistan where the literacy rate is below 20%, this led to some people being cheated. The central bank then replaced the Rs 20 note with a new one with a different colour.