Demonetisation: RBI attempts to bring liquidity through soiled notes

The shortage of currency notes in the country post the demonetisation of Rs 500 and Rs 1000 bills, compelled the apex bank, Reserve Bank of India to put soiled notes back into circulation with a view to improving liquidity in the cash-crunch scenario.

According to banking circle sources, with the stock of valid legal tenders hitting rock bottom at most banks and currency chests, the RBI has brought back the soiled notes in the denomination of Rs 50, Rs 20 and Rs 10 back into circulation thereby attempting to ease the demand pressure.

"The RBI normally makes pulp of these soiled notes, which can no longer be circulated. But the shortage of the currency is such that RBI has put these soiled notes back into circulation. The customers have no option but to accept these notes from the bank," said a senior banker.

As per the RBI's definition, soiled notes are those which have become dirty and slightly cut without its vital information such as number, watermark and governor's signature being affected.

According to banking experts, two types of notes usually come into circulation.

"First are those which are newly printed notes, the second are those which are reissued for circulation by the RBI. The soiled notes are the third category, which are non-issuable. These soiled notes are coming back into circulation. There is no stock of new notes hence the RBI is now reissuing the non-issuable notes," said C H Venkatachalam, General Secretary, All India Bank Employees' Association (AIBEA).

In July this year, the RBI had directed all banks to exchange maximum 20 pieces of soiled notes with a limit upto Rs 5,000 per day. This exchange, targeted to withdraw soiled notes from the circulation, was allowed over the counter free of charge.