Costly Botch-Up: Rajan Was RBI Guv, But Notes Had Subbarao’s Sign
Call it sloppiness, sheer incompetence, wastage or just another means of corruption. The outcome was loss in crores to the national exchequer, by the very corporation that prints four denominations of Indian banknotes.
The Security Printing and Minting Corporation of India Ltd (SPMCIL), the public sector unit under the Finance Ministry leading operations at the two banknote presses in Dewas and Nashik, continued to print high-value currency notes with the signature of an RBI governor for nearly a month after he had completed his tenure in September 2013.
The sheer incompetence of SPMCIL staff caused an “infructuous expenditure” of Rs 37 crore, according to a Comptroller and Auditor General of India (CAG) investigation, details of which are contained in its Report No. 21 of 2015.
This happened at the Dewas Bank Note Press when M S Rana, against whom there have been several charges of corruption and misappropriation of money, was SPMCIL chairman and managing director.
According to the CAG report, which is in The Quint’s possession, the signature of Duvvuri Subbarao, who retired as RBI governor on 4 September 2013, continued to be printed on the old Rs 500 currency notes even though Raghuram Rajan took over from him the same day. Subbarao’s signature was carried on the Rs 100 and the Rs 50 notes as well.
Letter Sent to Incorporate Rajan’s Initials
The Bharatiya Reserve Bank Note Mudran Private Ltd (BRBNMPL), which is a wholly-owned subsidiary of the RBI, is the 'nominated agency' for issuing designs/printing plates with the approved signature of the central bank governor to SPMCIL.
Subbarao, who assumed responsibilities as RBI governor on 5 September 2008, demitted office on 2 September 2013, when Raghuram Rajan took charge. BRBNMPL, the CAG report says, intimated the Dewas Bank Note Press through a 14 September 2013 letter that approval of the RBI to specimen note of Rs 10 denomination with the signature of the new governor was received.
BRBNMPL requested SPMCIL’s Dewas unit to collect the “security material to start regular banknote printing”, besides also informing the Bank Note Press on 17 October 2013 that approval had been given for the “machine proof” of the Rs 50, Rs 100 and Rs 500 denomination banknotes incorporating the signature of the governor. The RBI instructed the Dewas press to “furnish details for preparation of nickel altos”.
A subsequent audit examination revealed that in 2008, the RBI advised that all banknote printing presses may start printing of currency notes bearing the signature of the newly appointed governor on all denominations from 1 January 2009.
“Accordingly, at the time of change-over of RBI governor in 2013, BNP, Dewas, should have followed the same instruction and started printing banknotes with the signature of the new governor with effect from January 1, 2014. While Currency Bank Note Press, Nashik, followed this procedure, BNP did not incorporate the signature of the new governor (Rajan) from January 1 2014, but continued printing banknotes with the signature of the former governor (Subbarao) till February 25 2014,” the CAG observed.
The Dewas BNP printed 372 million pieces of banknotes between January and February 2014 and remitted 146 million pieces to various RBI regional offices, forcing the central bank to bring the seriousness of the issue to the notice of SPMCIL.
Audit examination, the CAG report says, revealed that about 230 million pieces of banknotes of Rs 20, Rs 100 and Rs 500 denomination, costing Rs 37 crore, were stocked with the BNP store (till March 2015). The chances of RBI “lifting” these notes “were very remote” as they were printed in 2014 carrying the signature of a former governor.
No Action by RBI
But shockingly, RBI did not trash the notes and certified them as legal tender. In February 2015, the SPMCIL top brass told auditors that:
- Banknotes printed between 1 January and 25 February 2014 were not rejected by the RBI
- BNP, Dewas, supplied 146 million pieces of banknotes to the RBI as payment had already been released by the central bank
- In a press release dated March 4 2014, the RBI claimed the banknotes with Subbarao’s signature were legal tender since part of the cash had been issued for public use
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