Even 12 days before India withdrew the legal tender status of its Rs 500 and Rs 1,000 notes for nearly every transaction, the country's currency printing presses were churning out old Rs 500 notes. The final stage of production of Rs 1,000 notes, however, ended three months ago.
In a response to a query under the Right to Information Act, 2005, Bharatiya Reserve Bank Note Mudran (P) Ltd, a wholly owned subsidiary of the Reserve Bank of India (RBI), informed that the last-stage production of Rs 500 note was on October 27, 2016.
On November 8, 2016, the Narendra Modi government and the RBI announced they had demonetised 86 per cent of the Indian currency in circulation, scrapping high-value Rs 500 and Rs 1,000 notes.
Questions over the readiness of the government and the RBI to handle the challenges post the high-value currency demonetisation have been arising from several quarters, including the parliamentary panels, although the government has not, so far, given the details of the planning that went behind the decision.
The RTI response hints while the government could have been contemplating the move for some time, the final decision came at a short notice.
The official position of the RBI is that its board had recommended the demonetisation move in a meeting held in New Delhi a couple of hours before the announcement.
Incidentally, in a notification on May 5, 2016, the RBI introduced an incentive scheme for the banks to encourage installation of ATMs dispensing lower-denomination notes (not bigger than Rs 100). The RBI promised to reimburse 50 per cent of the actual cost of the machine or Rs 200,000 (whichever is lower) for each such installation in urban areas. In rural areas, the amount was 60 per cent or Rs 2,50,000.
However, the scheme had few takers, which prompted the RBI to come out with another notification on November 2, just six days before the note ban. The directive had wanted banks to recalibrate 10 per cent of their ATM networks to dispense only Rs 100 notes and that, too, within a period of 15 days.
The directives also point to the last-minute attempts made by the government to ease the problems that were anticipated after the demonetisation announcement.
In a written reply to a question in Rajya Sabha in February 2017, Arjun Ram Meghwal, Minister of State, Ministry of Finance, stated that the matter to demonetise currency was under discussion (in consultation with the RBI) for several months preceding November 8, 2016.
He explained that the government, in a letter dated November 7, 2016, requested the RBI to consider cancellation of legal tender character of Rs 500 and Rs 1,000 denomination with the objective to eliminate black money and to curb the infusion and circulation of fake Indian currency notes (FICN). The central board of the RBI, in its meeting the next day, deliberated the proposal in detail and recommended withdrawal of the legal tender status of such notes, he pointed out.
The reply also specified that the currency returned to the RBI as on December 10, 2016, amounted to Rs 12.44 lakh crore although the actual amount returned would be known only after the data is reconciled with the physical cash balances to eliminate counterfeit notes, accounting errors, possible double counts and so on.
That process is yet to be completed.