By ANNA KASHIKUMARThe Reserve Bank of India has asked banks to issue Rs 500 and Rs 1,000 notes with biometric authentication, a move that could have huge implications for cash and online payments, according to an expert.
While the government has said it will keep the old Rs 500/1,000 currency notes and convert them into new Rs 500 or Rs 1.5 notes, the RBI has asked the banks to do so.
This would mean the old notes could be exchanged for new ones, with no risk of money laundering or counterfeit notes.
This would also give a boost to digital payments in the country, where the cash shortage is growing.
“In the short term, this will be beneficial for consumers, but for long term it is going to be very problematic,” said Ashok Bhaskar, partner at consultancy M&M.
B, who has advised the government on issues related to digital transactions.
In the wake of the demonetisation drive, the government said it was considering converting all old Rs 100 and Rs 500 currency notes into Rs 500, 1,500 and 2,000, respectively, as well as giving them biometric and biometrics-based security features, to be used for both cash and electronic payments.
The government is also mulling over creating a national banknote with a biometric security feature, including iris recognition.
The banknote will be printed in the same ink as the existing currency notes, and have the same face value.
The Reserve Board of India, which has already issued about 500,000 banknotes to be scrapped, said it would consider issuing similar notes in the future.
In the current cash crunch, the cash demand in the economy is still at its peak and the RBI, in its first announcement since the demonitisation drive was announced, said the demand was expected to continue to increase in coming months.
“We are planning to issue notes in denominations of Rs 500 to Rs 2,500, and Rs 2 lakh to Rs 10 lakh.
The demand for banknotes will be high,” said Anant Gehlot, vice-president, currency and exchange at the RBI.
Gehlot said the banknote would be printed from an alloy that is used in the construction of most banknotes.
“This will allow the notes to have a low weight and be easily accepted by people.
The metal will be very resistant to fingerprints, and it will be much harder to break,” he said.
The new notes would also be issued in denominations from Rs 2 to Rs 20 lakh, as part of the government’s plan to convert all old currency notes to cash.
It has said that the government will print new currency notes in a similar fashion to the existing notes.
“The government will use biometrically-based and biometric technology to ensure that the notes do not come into circulation with any trace of any money or financial instrument,” Gehloth said.