What Will RBI do with 18 billion 500 and 1000 Rupees Notes?

The demonetization of Rs 500 and Rs 1000 notes announced on 8th of November this year, has resulted in the accumulation of a total of 18 billion stack of notes, which has an approximate value of Rs. 14 lakh crore out of circulation. As per the announcement, the old notes can only be used at petrol pumps and other government utilities, and that too, till December 15th of this year itself. With such a huge amount of accumulated notes, people are wondering about all the possible fate of these illegal tender. What will RBI do?

It is the responsibility of the Reserve Bank of India (RBI) to dispose off these old notes, and the RBI along with the printer and issuer of currency, have inherited these bulk of the old currency notes and most probably will shred it and pulp it for the recycling purposes.

Options for the RBI?

Some other options available for the RBI in consideration of these old notes are as follows:
• Most of the RBI branches have shredding centers, and the respective banks will send the collected old notes, properly arranged in neat bundles and stacks which will help them to be turned into heaps of short strips.
• These heaps of notes will then be recycled into pulp and can then be transformed into either compressed blocks or briquettes.
• The pulp so obtained can also be used to make office stationary items such as calendars, files, boards and paper weights.
• Soiled notes is also used to make briquettes nowadays. The shredded notes are compressed into a thick mass resembling a cylinder like shape, and they just differ in size.

Ever since the Prime Minister Narendra Modi announced about this demonetization, it has been in the news that the RBI had started prepping to deal with the possessed old currency notes few days before the announcement was made. A candidate was selected from Kannur, a place in Kerela, from a plywood company for a pilot project and was also provided with a few gunny bags of shredded 500 and 1000 rupees notes to complete the process of pulping.

There are even several companies that have signed a contract with the RBI in which they will process 40 tons of shredded notes at the cost of Rs. 250 per ton. Even the briquettes formed will be sold for the use of various industrial purposes through tenders, in which a kilo of briquette will fetch around Rs 5 or Rs 6.

The various methods written above are relatively new kind of disposal method used but the central bank. Till the year 2001, there was only incineration method applied for the disposal of old or discarded currencies.