Currency chests swamped by deluge of scrapped notes

Banks all over the country are facing a logistics nightmare. Where do they store the overflowing currency exchanged by people desperate to get rid of notes that are no longer legal tender?

Since the dramatic announcement of a fortnight ago, a whopping Rs 5.44 lakh crore worth of high-value currency (Rs 500 and Rs 1,000 notes) has been returned to bank coffers. It is a sea of notes and banks are being deluged.

This is creating unprecedented chaos.

As Thomas Franco, trade union leader and leading functionary of the State Bank Officers' Association said, "Practically, this cash is supposed to be kept in bins inside the vault. Bins have no space now. So it is kept on the floor. Newspapers are spread on the floor and these notes are kept there (in the strong room). This is highly risky and the chances of notes being missed is very high".

Franco enumerates the risks banks face:

1. Handling the soiled notes itself is not easy. It is making people fall sick for there is stench and fungus formed on the surface as it has been kept for long without use.

2. Maintaining the currency is another issue. If something goes wrong, ultimately only the joint custodians will be put to hardship.

3. Counterfeit currency. We are collecting in such a hurry and plenty of counterfeit notes are also being pushed.

4. People have started making xerox copies of the new Rs 2,000 note already. Very soon, counterfeits of these new notes might also come into circulation.

5. The machines which can segregate the counterfeit notes are not calibrated for the new notes (both Rs 500 and Rs 2,000). Now, printing fake Rs 2,000 notes could be easy for such fraudsters and this will cause bigger problems.

Asked what would be the way out, Franco said, "The counterfeit notes in circulation (according to reports) are about Rs 400 cr to Rs 500 cr of the total circulation of Rs 17 lakh crore. Just putting in a stronger mechanism in the border areas, in banks, shops - just put fake currency detectors – scrutinise and nab the culprit – that would have sufficed. As for terrorist funding – there are reports from the National Crime Records Bureau that these are mostly done through wire to secret accounts."

Franco said the demonetisation exercise need not have been done just for stopping circulation of counterfeit notes. He claimed that proper monitoring of the system would have sufficed since every bank or branch now has counterfeit detecting machines.

He suggests even six months time could have been given. This would have avoided the rush to exchange and the government would have had enough time to pump in new currency. Besides, it would not have been possible to do anything with the high denomination notes and these could have been monitored, when they were deposited in bank accounts.