An email from our old friend Puneet aprised us to a new initiative in India to replace old currency notes with new notes with enhanced security features.
The reason for the change is speculated by many, including the BBC, to reduce the flow of black money (including undeclared, untaxed, counterfeit, and laundered money) through India’s economy.
Indeed, counterfeiting is a national crisis in India, and the new security features on the bills should help reduce the ability of counterfeiters to replicate the notes.
But in terms of getting illegally acquired but genuine notes off the street, this program doesn’t do much to cleanse the economy from the scourage of black money.
Live Mint points out that anybody who wants to exchange their old bills for new ones will be able to do so, and they won’t have to divulge their identities:
…If one looks at the RBI announcement, it is clear that the old currency notes can be exchanged for new ones at any bank branch from April to June 2014 without any questions being asked as to the name of the person giving the notes, her Permanent Account Number (PAN), address, etc. One can exchange the notes even at branches where one does not have a bank account. It is only after 30 June that one would have to give the name and PAN to exchange high denomination currency notes. Therefore, any person having undisclosed cash in her possession can easily exchange the old currency notes till June 2014 without disclosing her identity…
Also, Money Jihad notes that there doesn’t seem to be any provision in the new currency roll-out for bank tellers to report unusual amounts of cash that are brought in for exchange, or for them to report exchanges that they suspect are being made on behalf of undisclosed third parties. Officials should move to incorporate such safeguards.