Mystery of Missing Rs 500 Notes: Who is Responsible? Govt or RBI?

You may not get to see the new Rs 500 notes for many months as there’s been a gross mismanagement in printing them.

The new Rs 500 note is missing from circulation.

In life after ‘cashtration’, the question that everyone is asking is – where is the new Rs 500 note? All of us have seen it on TV or on WhatsApp, but not many of us have actually touched it. The reason: Gross mismanagement in printing this crucial denomination.

• A total of 1,660 crore notes of Rs 500 denomination were in circulation
• So far, only 1 crore notes have been printed, which is a mere 0.06 percent
• More than half of total value of Indian currency was in the form of Rs 500 notes
• The corporation printing Rs 500 notes does not have a full-time CMD
• There is an ongoing “battle” between the corporation and the RBI
• Currency presses with modern machines not given Rs 500 notes for printing
• Former RBI deputy governor says mismanagement in printing Rs 500 notes

Before delving into the reasons for the delay, let’s first see just how crucial the Rs 500 note is. Before Prime Minister Narendra Modi made the 8 November demonetisation announcement, there were 1,660 crore notes of Rs 500 denomination. The total value of these notes was Rs 8.3 lakh crore, which was more than half the total value (Rs 16.28 lakh crore) of the currency in circulation. Therefore, it was the single-most important denomination in circulation.

Shockingly, the printing of the new ₹500 notes began hardly a week before Modi’s announcement. And in the last three weeks, the two presses have only been able to deliver 1 crore notes. To return to normalcy, an additional 1,659 crore notes need to be printed. In other words, RBI has replaced just 0.06 percent of Rs 500 notes which were in circulation before. There is no indication how long will it take to print these many notes.

Also Read: Did the Govt Use Rajan’s Exit to Push Demonetisation Through?

Why the Delay?

Currency note press at Nashik has been working for 3 weeks without any weekly off. (Photo: Ashish Dikshit)

To find an answer to that question, we visited Nashik where the Currency Note Press (CNP) is printing Rs 500 notes. Apart from CNP, the currency press at Dewas in Madhya Pradesh is also printing Rs 500 notes. Both the presses are owned by a corporation called SPMCIL, functioning under the Ministry of Finance.

RBI runs two more presses which are printing Rs 2,000 notes. The printing of these notes began around two months before the 8 November announcement. These presses have modern machinery and can print at a faster rate. As the order of printing ₹2,000 notes was given well in advance and to presses equipped with better machinery, these notes were with the banks within 48 hours of Modi’s announcement.

What then stopped the RBI and the Finance Ministry from doing the same with Rs 500 notes? Why did the printing of Rs 500 notes begin seven weeks later? Why were the two presses with old technology given the task of printing the most important note? Who took that decision?

Also Read: Votes/Notes/Polls: Has PM Won or Lost the First Note Ban Round?

Rift Between RBI & Currency Press

Although officials at CNP, Nashik are not allowed to speak with reporters, some employees working on the Rs 500 note agreed to speak on the condition of anonymity. They washed their hands off the responsibility saying that they simply implemented the RBI’s orders and went on to blame the central bank for the delay and the consequent mess.

We started working on the new note when we got the design, paper and approval. The RBI officers lack knowledge of printing. They don’t know ground realities. RBI has set up two of its own presses and is printing the 2,000 rupee notes there. But the printing quality is poor. They don’t even give enough time to dry.  We are in the business of designing and printing notes from 1925, but now RBI wants to do everything from designing to printing. It should stick to its job as a regulator.

After meeting several employees at the Nashik press, it was clear that there was a rift between SPMCIL and RBI. Former deputy governor of RBI KC Chakrabarty confirmed to The Quint that there was a “battle going on for a pretty long time.” He blamed the Finance Ministry for the delay in printing the Rs 500 notes.

These presses (run by SPMCIL) are not known for their efficiency. They are a little lethargic. But the main point is that the corporation (SPMCIL) doesn’t have a chief executive officer! How can they not have a leader at this critical situation? Who is there to make quick decisions?

KC Chakrabarty, Former Deputy Governor, RBI

MS Rana was removed from the post of CMD of the corporation in July 2016. Praveen Garg, who is a Joint Secretary in Ministry of Finance has been given the charge till a regular appointment is made. When asked who was responsible for the delay in appointment and the overall mess, Chakrabarty refused to take names, but blamed the Finance Minister.

We don’t know who’s responsible. It’s a matter of investigation. Those who are responsible for making the appointment should be asked. They should have planned the whole exercise in a better way.

KC Chakrabarty, Former Deputy Governor, RBI

The Quint then put that question to the Finance Ministry, which tried to play it down.

Recruitment process is going on. The officers who have been given the charge are capable of dealing with the situation. The announcement came all of a sudden. The situation is improving gradually. There can be some problems in some areas, but we’ve managed the situation to a large extent.

DS Malik, Spokesperson, Finance Ministry

Will RBI Speak Up?

The Reserve Bank of India (RBI) Governor Urjit Patel speaks with Finance Minister Arun Jaitley (R) at a seminar in Mumbai, India, 13 October 2016. Patel has not spoken publicly about demonetisation yet. (Picture: Reuters)

So there is an apparent discord between the regulator and printer of Rs 500 notes. The corporation printing the notes does not have a full-time CEO.

Many questions still remain. Was there a delay in sending the new design of Rs 500 note to presses? Was there a communication gap? Why were “lethargic” presses chosen to print these notes? Who is responsible for these decisions?

Many of these could be answered if the RBI speaks up. However, the questionnaire sent to RBI by The Quint was not responded to.

Also Read: The Loud Silence Of RBI Governor Urjit Patel