What Happens To Demonetized Notes?


Author – Vidhi Bubna

Image Courtesy – Indiatimes.com

This morning, I was sitting on the couch and sipping coffee when my father left for work. However, his daily routine from the past one month has changed; he goes to the bank first to get the old currency exchanged and then to his office. Since the demonetization drive made by the Indian government two months ago, we all are tired of standing in long queues in banks and ATMs to get our money exchanged.

While we analyze and debate the implications and after-effects of demonetization, have we ever wondered what happens to the old demonetized notes that are deposited in the banks? The status of India’s largest currency notes of INR500 and INR1,000 have been reduced to only paper and they will be recycled to produce other things.

The government has collected about 18 billion notes of old currency, amounting to INR8 trillion. Previously, the government just chose to burn the demonetized money, but the humungous volume of the current drive would add to massive pollution. So the Reserve Bank of India is now seeking contracts with hardboard manufacturers and it is selling old, shredded notes to them so that they are recycled. This is a more efficient way of disposing the old notes rather than burning and it reduces the carbon footprint.

RBI has begun verifying and purchasing 40 note shredding machines in 19 different cities across India. These imported machines can shred and destroy about 250,000 notes in an hour. The notes are shredded at the rate of INR250 per metric ton and the RBI shreds about 60 tons of notes per week. This initiative by the government is not only cost effective, but it also saves the by preventing burning.

RBI’s Kerala branch in Thiruvananthapuram has already sent the shredded currency to a hardboard factory in Kannur. The factory uses 5% of the paper pulp from shredded notes to be mixed with 95% wood pulp for producing hardboard. If it gets the concentration of recycled paper wrong, the end product will not be usable. This is because the currency notes have a very hard pulp that makes them very difficult to recycle.

So far, the factory has received 140 metric tons of shredded currency notes. For every 100 kg of hardboard produced, only about 6 kg is made up of the old shredded notes, which are also used to make calendars, files and other stationery. You could end up buying cheap hardboard that is made up of the shredded old currency that once held immense value and now it is used for crafts!

The shredded currency is also sent to Dubai to produce furniture items like photo frames, mirror frame backing, book shelves and drawer bottoms. They are also converted into biomass briquettes to be used as fuel for factory boilers. Biomass briquettes have a less negative impact on the environment, since they are made of renewable materials and do not deplete natural resources.

Different qualities of paper can produce different amounts of biofuel. Paper that has not been recycled often produces a lot more energy, since it goes through electric machines, high temperatures and a lot of heat that causes its energy to reduce. The old currency notes are very hard and to convert them to bio-mass briquettes, a lot of energy is used and they undergo a lot of heat. This results in them having less energy. Converting old notes to biomass is better than burning them and it may be a little costlier than simply burning the notes. However, the long term cost of burning the notes as fuel is high on the environment, so it is better to recycle them.

People have previously burnt demonetized notes in countries like Sweden to protect themselves from the cold. There have been various countries that simply burn the notes. Technology that can recycle old notes is expensive and very few companies possess such technology. The company chosen by the government in Kerala is the only one that has the machine to recycle old currency notes in India. This initiative taken by the government to recycle old notes sets an example for the entire country and depicts the importance of recycling resources.

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