Posts this month
A blog on financial markets and their regulation
The Reserve Bank of India issued a cryptic press release yesterday saying:
With a view to enhancing operational efficiency and cost effectiveness in banknote printing at banknote presses, it has been decided to issue, to begin with, fresh banknotes of Rs 500 denomination in packets, which may not necessarily all be sequentially numbered. This is consistent with international best practices. Packets of Banknotes in non-sequential number will, as usual, have 100 notes. The bands of the packets containing the banknotes in non-sequential number will clearly be superscribed with the legend, “The packet contains 100 notes not numbered sequentially.”
The confusion comes from the three phrases “enhancing operational efficiency and cost effectiveness in banknote printing”, “to begin with”, and “international best practices” each of which gives a different idea of what this is all about. My very limited understanding of the subject is that there are three reasons for non sequential numbering of currency notes:
Currently, all fresh banknote packets issued by the Reserve Bank contain one hundred serially numbered banknotes. In a serially numbered packet, banknotes with any defect detected at the printing stage are replaced at the presses by banknotes carrying the same number in order to maintain the sequence. As part of the Reserve Bank’s ongoing efforts to benchmark its procedures against international best practices, as also for greater efficiency and cost effectiveness, it is proposed to adopt the STAR series numbering system for replacement of defectively printed banknotes. A ‘star series’ banknote will have an additional character, viz., a star symbol * in the number panel and will be similar in every other respect to a normal bank note and would be legal tender. Any new note packet carrying a star series note will have a band on which it will be indicated that the packet contains a star note(s). The packet will contain one hundred notes, though not in serial order. To begin with, star series notes would be issued in lower denominations, i.e., Rs.10, Rs.20 and Rs.50 in the Mahatma Gandhi series. Wide publicity through issue of press advertisements is being undertaken and banks are urged to keep their branches well informed so as to guide their customers.
So what exactly does the RBI mean in its cryptic press release? I fail to see the need for “constructive ambiguity” when it comes to the numbering of banknotes. Any comments that would clarify my understanding of this would be welcome.