The government on Tuesday asked banks to start using indelible ink to mark and identify persons who exchange old Rs. 500 and Rs. 1,000 notes upto Rs 4,500 to ensure that the facility isn’t used multiple times, even as people continued to queue up for cash to meet their daily needs at banks and ATMs across the country.
A small mark of indelible ink, used during elections to prevent multiple voting, will be put on the right hand finger of persons exchanging the recalled currency notes.
A top official said freshly minted notes of Rs. 100 denomination will start reaching banks soon to ease the lack of change for the new Rs 2,000 and Rs 500 notes that is impeding day-to-day transactions, a full week after the government launched its demonetisation attack on black money.
Finance Minister Arun Jaitley, meanwhile, asserted that the Centre was fully prepared for the impact of the exercise and was working for ‘effective currency management’ even as officials sought to manage the fallout.
“There is no reason to panic,” Economic Affairs Secretary Shaktikanta Das said.
“There are enough currency notes with banks and in the system. The situation will be continuously monitored… both the supply of cash and of essential commodities.” The government has also asked religious institutions, which receive donations in smaller denomination notes, to deposit these notes in bank accounts to increase their supply in circulation, Mr. Das added.
Both the Reserve Bank of India and the government emphasised that the facility to exchange Rs. 4,500 worth of old notes was a one-time opportunity and not a daily limit to clear any confusion that may have arisen in the matter owing to the language of the notification.
“To prevent such misuse, we have decided that the branches will resort to indelible ink marks for currency exchanges,” said Mr. Das.
An RBI official said, “This was meant to help people tide over their immediate cash needs. For the rest, you have to use the withdrawal facility.”
Banks to get ink today
Indelible ink will be sent to all bank branches on Tuesday night following a government order to mark persons exchanging Rs. 4,500 of old Rs. 500 and Rs. 1,000 notes, to prevent repeat transactions, a senior government official said.
The ink manufactured at the Mysore Paints and Varnish Ltd — the firm that has supplied indelible ink to the Election Commission since 1962, will be made available to banks and post offices.
Economists however, reacted with consternation to the move.
“The majority of the poor in India, who have their savings in cash and those who don’t have bank accounts, have effectively seen their life savings limited to Rs 4,500, no matter what it would have been earlier,” said Pronab Sen, country director at International Growth Centre and former chairman of the National Statistics Commission.
However, a Finance Ministry statement issued late evening after a review of the ground situation by Prime Minister Narendra Modi with top officials and RBI governor Urjit Patel, seemed to suggest that the curb on exchange of old notes was advisory in nature, creating further confusion.
“Cash disbursement points, especially bank branches will be advised to put up notices outside their branches advising people to avoid exchange of old notes over the counter multiple times,” the statement said.
Technically, bank accounts can still be opened by persons who don’t have one, to deposit savings.
SBI chief’s stance
However, though State Bank of India chairperson Arundhati Bhattacharya has conceded that all regular banking work is likely to suffer for at least another fortnight as most bank staff were busy coping with the demonetisation process.
“We have also noticed that people are trying to convert black money by sending many people to different branches,” Economic Affairs Secretary Shaktikanta Das said.
The government has also constituted a special taskforce to keep a watch on the infusion of fake currency in vulnerable areas, Mr. Das said, adding that a technology team has also been formed to popularise the use of e-wallets and also to ensure that ATM recalibration progresses apace.
