14 November 2018
People queue up to deposit their old 500 and 100 rupee notes at a bank in the northern city of Kanpur, India. Photo: Reuters
People queue up to deposit their old 500 and 100 rupee notes at a bank in the northern city of Kanpur, India. Photo: Reuters

What will India do with 23 bln worthless banknotes?

India is grappling with a new challenge after Prime Minister Narendra Modi ordered the country’s larger banknotes withdrawn from circulation.

The order, aimed at fighting corruption and tax evasion, has rendered more than 23 billion banknotes worthless.

If these bills are collected in a single pile, they would be 300 times the height of Mount Everest, and if laid out beside each other, they’d be long enough to reach the moon and back five times, according to Bloomberg.

Modi’s order to invalidate the country’s 500 and 1,000 rupee notes, which some reports estimate could be worth about US$220 billion, will suck out 86 percent of the nation’s currency in circulation. Citizens have until Dec. 30 to exchange them for fresh notes.

The Reserve Bank of India, the country’s central bank, spends more than US$400 million on currency production each year, about 1.5 percent of the global bank note industry, Bloomberg says.

Most of the junked notes will be destroyed and dumped in landfills, similar to what is done with soiled notes, a senior central bank official told the financial news and data provider.

Many will also be turned into briquettes for industrial use, while some could be converted into paperweights and other decorative or functional objects.

About 98 percent of all consumer payments in India use cash, and the high frequency of handling forces the monetary authority to withdraw about 75 percent of its notes in circulation in a typical year – more than the number of banknotes collectively produced by all countries taken together with the exception of China, the report said.

Not all are bound to be destroyed, however.

Some of the notes, especially those that carry the signature of the highly respected former central bank governor Raghuram Rajan, are being sold at twice their face value on websites such as those run by EBay Inc.

There are also media reports that some people, apparently those who don’t want authorities to know the extent of their fortune, are tearing and burning their bills themselves to avoid prosecution.

The government estimates that as much as a third of the 15 trillion rupees withdrawn won’t be deposited in banks.

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