Withdrawal of pre-2005 notes nothing to do with elections: RBI Governor

Reserve Bank of India Governor Raghuram Rajan Thursday clarified that the order to withdraw all currency notes printed and issued before 2005 was not a "demonetisation" measure and has nothing to do with the coming elections.

The measure was necesasry to neutralise the fake currency in circulation, he said after delivering the R.N. Kao Memorial Lecture here.

The RBI Governnor said the post-2005 notes have "better security factors".

Central Bureau of Investigation (CBI) director Ranjit Sinha posed the question at the interactive session following the annual lecture organized by the Cabinet Secretariat's Research and Analysis Wing.

Sinha wondered about the timing of the announcement, whether it had anything to do with the elections.

Rajan clarified that the notes "will remain legal tender" and the "public will not be subjected to hardship."

He said the measure did not amount to "demonetisation" and it was only an "attempt to replace less effective notes with more effective notes" - the year of printing is there in small print at the back of post-2005 currency notes - that cannot easily be faked or forged.

He said it was a move to neutralise the large number of "forged notes".

He emphasized that the recommendation had been made by the union finance ministry long ago and it just happened to get implemented now. It had nothing whatsoever to do with the elections, he took pains to explain.

The RBI statement Wednesday said "After Mrch 31, 2014 (RBI) will completely withdraw from circulation all bank notes issued prior to 2005. From April 1. 2014 the public will be required to approach banks for exchanging these notes."

The RBI asked people not to panic and requested them to "actively cooperate in the withdrawal process."