DNA EXCLUSIVE: Demonetized Rs 500 and Rs 1,000 notes not shredded, are still lying in banks’ currency chests

Wondering where the old currency notes deposited at banks during the note ban in November-December 2016 went?

Not a single old Rs 500 and Rs 1,000 note has been destroyed or shredded, bankers said. All the demonetized currency notes are stored in 4,075 currency chests of banks.

The process of counting and weeding out counterfeit currency notes that may have come into the system is still underway by the Reserve Bank of India (RBI).

The central bank’s diktat to store all old currency notes in their chests is creating a space crunch for banks and restricting their ability to lift new notes for want of storage space. Bankers say this has contributed to the currency shortage, leading to ATMs in many areas going dry.

RBI did not respond to a detailed query by DNA Money.

Bankers said the other reason for the currency shortage is that RBI is yet to print more notes to reach the pre-demonetization levels. At present, the currency in circulation is about Rs 2.46 lakh crore less than what it was during pre-demonetization.

A senior banker said, “No notes are shredded or destroyed so far as the central bank wants to check every note for fake currency that may have come into the system. Since RBI does not have space to store them, the entire lot of old notes is stored in banks’ currency chests. It is putting constraints on banks from lifting new notes from RBI as there is no place to store them.”

A senior banker from a private bank also confirmed that the bank’s currency chest was being used for storing old notes. “This is creating a space crunch for us. Even if we are eligible for more currency, we are unable to take it from RBI for want of space,” he said.

Currency chests at specific branches of selected banks are authorised by the RBI to stock notes and coins. RBI offices in various cities receive the notes from note presses and coins from RBI and government mints. These are sent to the currency chests and small coin depots from where they are distributed to bank branches. RBI has set up over 4,075 currency chests all over the country. Besides these, there are around 3,746 bank branches that act as small coin depots to stock small coins.

Of the 4,075 currency chests selected by RBI, 2,722 (around 67%) are held in branches of the State Bank of India. Other nationalised banks hold 1,173 chests, taking the share of PSU banks to 95%. About 160 currency chests are operated by private banks, about three by co-operative banks and about four by the foreign banks and five by regional rural banks. However, the regional rural banks and the co-operative banks do not play a big role in stocking currency on behalf of RBI.

A senior official from a currency management company said, “ATMs are not being replenished fast enough because there is still a shortage of cash. The government’s focus on digital may also be forcing RBI to go slow on printing.”

According to the latest data from the central bank, the total currency in circulation is Rs 15.51 lakh crore as on August 4, 2017. Just before the demonetization, the total currency in circulation was Rs 17.97 lakh crore as on November 4, 2016.

On November 8, 2016, currency notes of denominations of Rs 1,000 and Rs 500, valued at Rs 15.4 lakh crore and constituting 86.9% of the value of total notes in circulation, were demonetized.

…& ANALYSIS

  • RBI has set up over 4,075 currency chests in India
  • 3,746 bank branches act as small coin depots
  • Of these, 2,722 (around 67%) are held in branches of State Bank of India

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