Three weeks after Prime Minister Narendra Modi’s stunning announcement declaring two high-value currency notes – Rs 500 and Rs 1,000 – invalid, the printing of the new Rs 500 note has grounded to a near-halt at the Nashik and Dewas printing presses.
RBI sources revealed that a series of glaring errors on the new Rs 500 notes, besides the low printing capacity at the Security Printing and Minting Corporation of India Ltd’s (SPMCIL) Nashik and Dewas presses, has now forced the Reserve Bank of India (RBI) and the Finance Ministry to call off printing of the particular currency denomination. The exercise will now be shifted to the Mysuru press, the sources added.
Rate of Printing New Rs 500 Notes is Low, Machinery Outdated
While SPMCIL is under the Finance Ministry, where the boss is Arun Jaitley, the Mysuru (Karnataka) and Salboni (West Midnapore in West Bengal) printing presses are run and operated by the RBI’s wholly-owned subsidiary Bharatiya Reserve Bank Note Mudran Ltd (BRBNML). The Mysuru and Salboni high-security currency printing presses are in the process of producing the new Rs 2,000 note at a combined rate of 40 million pieces (20 + 20, respectively).
A former RBI deputy governor, who retired a few months before the Modi government and the newly-appointed central bank Governor Urjit Patel set their sights on the now-controversial demonetisation exercise, disclosed to The Quint that the rate of printing of the new Rs 500 note was “very low at only 5 million pieces per day at Nashik and Dewas, where the machinery was outdated”.
At this rate, the printing of the new Rs 500 note would take 10 months, the former RBI deputy governor said, adding that “the Modi government not only acted in haste, but consulted very few officials who had no idea or knowledge of the Herculean task before them”.
“We Are Looking at a Financial Catastrophe”
The Quint had reported on 16 November that the rate of printing of the new Rs 500 notes, as compared to the new Rs 2,000 notes, was abysmally low. The Quint’s report had also exposed that very few Rs 100 currency notes, which went into high demand following Modi’s 8 November announcement, were being printed.
Other RBI sources confirmed that even after shifting operations to print the new Rs 500 notes at BRBNML’s Mysuru press, it would take 21 additional days to synergise machinery and high-end technology to churn out the fresh high-value denomination.
“What we are looking at is a financial catastrophe,” the former RBI deputy governor said, livid at the central bank and the government’s “inefficiency” in handling an emergency situation.
He said it “is a myth that the Prime Minister’s ostensible move to curb black money would be achieved”. He said that the “hardest hit” would be the poor and the lower middle class because they “deal more in cash” than the rich. Also, the RBI ex-deputy governor said that “cash has been hit, not black money”.
Demonetisation Will Slow Down Economic Growth
The other more serious consequence of the Modi government’s “disastrous” demonetisation move would be that it would slow down economic growth and there “will be no liquidity”.
Preferring anonymity, the former RBI deputy governor revealed that “even though much of the work on the new notes began during the tenure of former Governor Raghuram Rajan, he was not enthusiastic about the government’s decision to demonetise the Rs 500 and Rs 1,000 notes.”
Many of the present problems the RBI is facing, the ex-deputy governor disclosed, is the result of the central bank’s “severe constraints, some of which can be traced, directly or indirectly, to the operations of the global suppliers and vendors in the banknote industry”.
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)