The announcement to scrap Rs.500 and Rs.1,000 bank notes might be called abrupt and impulsive, but it was in the works for about six months, said people aware of the process. This was a process initiated by Prime Minister Narendra Modi and was intended to be a follow-up to other steps to curb black money such as the income disclosure scheme, they said, according to a report by Mint.
The design of the new Rs500 and Rs2,000 notes was finalised and the process of printing started three months ago, they said, on the condition of anonymity. Till date, around 3.5 billion pieces of the Rs.2,000 note have been printed. That is about half of the 6.3 billion pieces of the Rs.1,000 denomination that were circulation at the end of March.
The process was kept so secret that even the top management of commercial banks were unaware till the PM’s speech on Tuesday night.
We were called for a 7pm meeting. For an hour, we chatted about this and that including S4A (Scheme for Sustainable Structuring of Stressed Assets), till at 8pm they switched on the TV and told us let’s listen to the PM’s speech,” said the managing director of a state-owned bank who attended the meeting.
On 2 November, the RBI had asked banks to dispense more Rs.100 notes through ATMs within the next fortnight. RBI’s statement said it issued this notice after it observed that very few banks had taken steps to dispense lower denomination notes after a 5 May circular asked for the same thing.
In the 5 May circular, the RBI introduced a scheme called the Currency Distribution & Exchange Scheme (CDES) under which the regulator agreed to incentivize banks for installing ATMs which dispense notes of denominations up to Rs.100. As per the scheme, the RBI had promised to reimburse 50% of the cost of the ATM machine or Rs.2 lakh, whichever is lower.
Separately, a week earlier, on 27 October, the central bank issued a warning on fake currency notes. It asked banks to put entire banking areas under CCTV surveillance and ensure that cash receipts in the denominations of Rs.100 and above are not put into re-circulation without the notes being machine-processed for authenticity.