15 months after note ban, RBI still processing returned notes

New Delhi: The RBI has said that Rs 500 and Rs 1,000 notes, returned to banks when the government demonetised high value currency 15-months ago, are still being “processed for their arithmetical accuracy and genuineness.”

This is being done in an “expedited manner,” the central bank said. “Specific bank notes are being processed for their arithmetical accuracy and genuineness and the reconciliation for the same is ongoing. This information can, therefore, be shared on completion of the process and reconciliation,” the RBI said in reply to an RTI application.

To a query on the number of demonetised notes, it said, “..subject to future corrections if any, arising in the course of verification process, the estimated value of specified bank notes received as on June 30, 2017 is Rs 15.28 trillion (lakh crore).” Asked to provide the details of the deadline for finishing the counting of demonetised notes, the RBI said “specified bank notes are being processed in an expedited manner.” As on date, 59 sophisticated currency verification and processing (CVPS) machines are in operation in RBI for the purpose, it said. The reply did not specify the location of the machines.

The RBI will also soon have greater flexibility in terms of managing its liquidity operations with the addition of one more tool ‘Standing Deposit Facility Scheme’ to its kit. Finance Minister Arun Jaitley, in his Budget, had proposed to amend the RBI Act to empower the central bank to come up with an additional instrument for liquidity management. The proposal forms part of the Finance Bill 2018 which is scheduled to be approved by Parliament by March 31.

“That is to provide one more tool for liquidity management. There is no more MSS (market stabilisation scheme),” Economic Affairs Secretary S. C. Garg told PTI.

The RBI proposed in November 2015 the introduction of the SDF by suitably amending the RBI Act. This would provide the RBI a new tool for liquidity management, particularly in times when the money market liquidity is in excess to deal with post-demonetisation like scenario.

CRR hike

Post-demonetisation, the RBI ran out of securities to offer as collateral and had to temporarily hike its cash reserve ratio (CRR) to force banks to park extra deposits with it. The CRR is the portion of deposits that banks have to compulsorily park with the RBI. Currently, the CRR is pegged at 4%.

When the liquidity position under the Liquidity Adjustment Facility (LAF) is outside comfort zone, the RBI uses an array of instruments to absorb/inject durable liquidity from/into the financial system