Banks have been struggling with a strange problem. Reportedly, It has become impossible for banks to exchange soiled or mutilated banknotes of Rs 200 and Rs 2,000 denomination as guidelines governing the two denomination notes have not been a part of Section 28 of the Reserve Bank of India (RBI) Act. The Act specifies currency notes of Rs 5, Rs 10, Rs 50, Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000 denomination, but Rs 200 and Rs 2,000 notes are conspicuously missing from the list.
Media reports say that the reason behind this is the status-quo in Reserve Bank of India (Note Refund) Rules 2009. As per the Note Refund Rules, it is mandatory for the bank branches to accept currency notes in the denomination of Rs 1, 2, 5, 10, 20, 50, 100, 500, 1000.
“Due to change in size of Mahatma Gandhi (New) Series notes, mutilated/imperfect notes in MG (New) series could not be exchanged under the existing rules necessitating amendments to RBI (Note Refund) Rules, 2009.The mutilated/imperfect notes in the MG (New) series can be exchanged after notification of amendments in the official gazette,” RBI said.
The Note Refund Rules describes a soiled note as one which has become dirty due to usage and also includes a two piece note pasted together wherein both the pieces presented belong to the same note, and form the entire note.
The Rs 2,000 rupee notes account for about 35 percent of the Rs 18.43 lakh crore currency in circulation in the country. The printing of this high denomination notes has been stopped as there are about Rs 6.70 lakh crore of Rs 2,000 notes in circulation.
The Rs 18.43 lakh crore currency in circulation compares to nearly Rs 17.97 lakh crore currency in circulation before demonetisation of old 500 and 1000 rupee notes.