THE Rs5,000 note is the unlikely culprit in a number of high-profile conversations in the country today, and for good reason.

The note, issued in 2006, plays a key role in large cash transactions mainly of a speculative or unscrupulous nature. Some quarters in the State Bank argue that the note is essential to simplify the cash management operations of banks that require large volumes of currency notes in their sprawling network of bank branches, and that cash management on this scale using smaller denominations is too cumbersome.

But that still begs the question: who really needs and uses the Rs5,000 note? It’s rarely seen in retail transactions. Much of the demand for the note, which circulates mostly outside the banking system once issued by a branch or ATM machine, comes from players who settle large transactions in cash on a daily basis. This should automatically raise questions about the nature of their work.

It is easy to make the case that the note ought to be discontinued. Large payments should be made through the banking system, and retail customers rarely need such high-denomination currency.

Most recently, the Public Accounts Committee of the National Assembly was told by the deputy governor of the State Bank that there was a need to study whether or not the note ought to continue to be printed.

This is the highest level of acknowledgement thus far that the mere presence of the note may be playing a role in perpetuating dubious transactions and the statement ought to be welcomed. But more importantly, the statement ought to be followed up on.

The uses to which the Rs5,000 note is put in the economy has already been studied, and many years ago its printing was actually discontinued for a brief period.

The deputy governor might want to revisit the study and that episode to add some detail to his knowledge about the role the note is playing in our economy.

Published in Dawn, August 29th, 2015

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