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Exclusive: You Can Get Rs 6,000 for Rs 1 Lakh of Demonetised Notes

The Quint spoke to an intermediary, who revealed how old notes of Rs 500 and 1,000 were being traded illegally.

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On the eve of the first anniversary of demonetisation, former Prime Minister Manmohan Singh termed it a "monumental blunder” that has proved to be “mere bluster to reap political dividends while the real offenders have escaped” – a statement that has turned out to be all the more significant in light of the demonetised currency trade.

Banned notes of Rs 500 and Rs 1,000 are still being exchanged for new notes – illegally. The Quint spoke to an intermediary, who revealed the tricks of the trade.


How Demonetised Currency Is Exchanged

The middleman, Juginder Singh (*name changed), said he had been exchanging old notes ever since demonetisation was announced. In December 2016, The Quint spoke to Singh for an insider’s account of the currency conversion industry that had exploded after note ban was rolled out and filled the pockets of the several middlemen who charged steep commission.

The government has now shut all doors for those looking to exchange old currency – all but one, that is. There is a loophole by which old notes are stealthily inserted into the RBI vault – a loophole accessible only to those in power.

Here is what Singh told us:

How do you exchange old notes?

My contacts are still exchanging old notes for new ones. If you give me Rs 1 lakh worth old notes then you will get Rs 6,000 in return. And this offer is on only till 31 March. All doors will be closed after that.

Why only till 31 March?

I can’t answer this question, but I know for certain that my contact collects old notes and goes straight to the bank where he hands it over to a banker. My contact works for a banker. I don’t know where the money goes from the bank, but I am sure that all the old notes are reaching the bank.

Will you exchange the currency immediately?

Absolutely. I take old notes from one hand and return new ones with the other. Let’s say, you bring me Rs 10 lakh in old currency. I’ll call my contact and decide on a particular time and place. I’ll tell him about the amount in code language, say for Rs 10 lakh I’ll say 10 L, and for Rs 10 crore, I’ll say 10 CR. I won’t introduce my contact with you and will make sure the contact is at least half a kilometre away from the place we’re scheduled to meet. I’ll collect old notes from you and give it to my contact, and I’ll give you the new notes that he hands over.

What is your cut in this whole thing?

Earlier, I’d earn a lot in commission. But now I get only 1 percent. My contact gives me Rs 7,000 per lakh, I keep Rs 1,000 and the remaining goes to the owner of the old notes.


How Are Old Notes Still Reaching RBI?

If the owner of the old notes gets just 6 percent in exchange, then who gets the benefits of the 94 percent? Singh says this is likely to be distributed in between the bankers and middlemen who carry the old notes to the RBI. He says:

You get at least 6 percent for scrap. Else nobody will even dare to exchange old notes because too much of risk is involved in it. Bankers and middlemen who are involved, are the beneficiaries of the 94 percent. I know several people who are still holding on to their old notes in the hope of getting more money in exchange.

Does the nexus extend to the politicians too?


In January 2018, former RBI director Vipin Malik had told The Quint that these illegal exchanges likely take two routes:

  1. Some rogue elements in the banks could be misusing the treasury (where old notes are stashed). According to Malik, the final or micro counting of the old notes is not yet complete. Hence these middlemen, in connivance with the bank officials, could be stashing old notes in the treasury.
  2. Neighbouring countries like Nepal, Bhutan, Bangladesh and Zimbabwe are still waiting to exchange old Indian notes, because the Indian government is yet to decide on how to exchange them. We do not have an exact count of the old notes in these countries.

In an RTI reply to the Press Trust of India in February 2018, the RBI said that the counting of demonetised notes is still on. In its annual report released in August 2017, RBI said 99 percent of demonetised currency were counted by June 2017 – which was worth Rs 15.44 trillion lakh crore.

So are we to believe that the RBI hasn’t completed counting the remaining 1 percent since June 2017?

Or are we to infer that the old notes that are still being exchanged are among this uncounted 1 percent of demonetised notes?


Old Notes Were Moved to Nepal

Singh also told The Quint that up until February 2018, he used to get old notes converted through a citizen of Nepal, based in Delhi.

He would pay Rs 20,000 for per Rs 1 lakh of old notes. I got money exchanged from him before. I used to keep Rs 5,000 as commission and pass on the rest to the owner of the old notes. The middleman exchanged notes till February because Nepal banks were accepting demonetised notes until then. But now, that window is shut. 

Singh said that his contact would collect old notes from India and send them to Nepal, where it would be deposited in bank accounts, via various bank account holders.


Lower Returns For Non-Delhi Residents

If the old notes are to be handed over to the middleman in any city outside of Delhi, then the owner of the old notes notes will get 5 percent of Rs 1 lakh in demonetised notes, Singh says.

How do you collect old notes from a different city?

My contact and I travel to the city where the old currency notes are hoarded. The initial expenses of travel will be borne by the owner of old notes, but will be refunded once the deal is over. We collect the old notes and hand over the new currency immediately.

Do you carry the old notes back to Delhi?

No. Considering that hoarding old currency notes beyond a certain amount is a crime, we don’t bring it back to Delhi. My contact will stash it in a bank in the same city.


In January 2018, Rs 97 crore in demonetised notes was seized by the police in Kanpur. At the time, the UP police said the accused didn’t have any channels to convert the old notes into newer ones. With the police failing to find the bankers and officials associated with the illegal trade of exchanging notes, the notorious racket continues to expand.

(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

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