A bold decision of the Reserve Bank

Reserve Bank of India Governor Raghuram Rajan on Thursday sought to quell fears over the decision to withdraw all pre-2005 currency notes from April 1, 2014, saying the RBI notification was not aimed at demonetisation.

Assuring the people that such currency notes would continue to be legal tender, Dr. Rajan said there was no cause for panic. The public would be required to approach banks for exchanging their pre-2005 notes.

The RBI on Wednesday said that after March 31 it would withdraw from circulation all currency notes issued prior to 2005.

“This is not an attempt to demonetise such currency notes. It is only that the pre-2005 currency notes can be easily forged, while the new currency notes being printed now have more security features,” Dr. Rajan said answering questions after delivering the 8th R.N. Kao Memorial Lecture of the Research and Analysis Wing.

‘There will be no hardship’

“I understand people are coming up with different interpretations. The public will not be subject to any hardship on account of this decision. I have to say that this decision has nothing to do with the elections. That is not the objective,” he said. Dr. Rajan was responding to a question by Central Bureau of Investigation Director Ranjit Sinha, who asked him about the implication of the RBI order.

Mr. Rajan said the move to replace the less effective currency notes with those having better security features was on the suggestion of the Finance Ministry.