Demonetisation shook India’s trust in currency. RBI must ensure that doesn’t happen again
The announcement by the Reserve Bank of India on Friday withdrawing Rs 2,000 denomination notes from circulation has predictably brought back the memories of demonetisation and the uncertainty of holding cash. Some would argue that this is not a big deal: the circulation of Rs 2,000 currency note was in any case shrinking and it was inevitable that it would be withdrawn some time or the other.
The Reserve Bank announcement was carefully worded to reinforce this view. The notes will remain legal tender and time has been given to exchange or deposit the withdrawn notes until September 30. Clearly some lessons have been learnt from the disastrous demonetisation of 2016. There was no dramatic address to the nation. It is presented as a normal exercise to implement the “clean money” policy, removing damaged or soiled notes from circulation, and to get rid of the notes that are, in any case, not used much in daily transactions.
There is no reason to mourn the demise of these purple pink notes. Whatever the reason for their original circulation, the purpose has been served. The more relevant question is on the wisdom of the abrupt announcement of their withdrawal by the Reserve Bank. A process…