Biz of new and worn bank notes thriving in Delhi

Rakesh Kumar is not like most of the street vendors in Old Delhi. The hand-painted sign on his wooden counter, “exchange damaged, old notes,” reveals a different story. He sells money.

For the past 40 years, Kumar has offered customers new bank notes for soiled or damaged ones for a fee that earns him about Rs 1 lakh ($1,600) a year. It has also helped him pay for the marriages of his three children.

“We charge commission depending on the condition of the note,” the 58-year-old Kumar said while examining some 1,000-rupee notes nibbled by rats. “Around 30-40 people come to us daily.”

Getting fresh banknotes or using soiled ones can be difficult in India. Shopkeepers and other merchants routinely refuse to accept such notes, while people require loose change and fresh notes for regular use.

This business of notes is livelihood for hundreds in Old Delhi, with vendors offering convenience to customers by charging a fee of up to 20 per cent to replace damaged banknotes. A mildly-damaged 500 rupee note, for instance, can be exchanged for Rs 480, while a bundle of crisp, new 10-rupee notes valued at Rs 1,000 is priced at Rs 1,050.

Such roadside vendors work jointly with agents who collect old notes and submit them at the Reserve Bank of India (RBI) office in central Delhi to claim their exchange value according to rules. The same agents also source new notes and distribute them to vendors for a piece of the profit.

The business, however, goes beyond these roadside counters.

Around 10 shops in an Old Delhi lane display new rupee bank notes in glass showcases to attract customers, with one shop even having a dedicated counter to repair notes using glue and adhesive tape. In this labyrinth of narrow lanes, one can see dozens of men counting hundreds of old and new notes.

One such dealer, who declined to be identified because he was not comfortable speaking to the media, said he sourced worn banknotes from customers and deposited them in bulk with the RBI to settle the claim.

The dealer and his son showed a text message confirming a recent electronic credit from the RBI and several physical letters from the central bank processing claims which ran into thousands of rupees.

“If a note is damaged, will you go to the RBI? What if you travel by bus and your pocket is picked,” said the dealer. “A maximum of 350 notes can be deposited in an envelope; we deposit them every week on Friday.”

The dealer, who crouched next to around 50 bundles of 10-rupee bank notes, said he sources new notes from banks and outside Delhi. As he spoke, he tracked commodity prices on his Samsung tablet and said he makes a profit of  Rs 4 lakh ($6,450) annually from this 70-year-old family business.

Other than Old Delhi, agents near the RBI office offer everything from home delivery of bundles of freshly minted banknotes to instant exchange of damaged notes for a fee.

Inside the RBI’s head office in Delhi, there are counters to exchange notes, where one needs to display an identity card issued by India’s election commission. People with documents such as a government-issued driver’s licence are denied entry.

The RBI Note Refund Rules say all banks are expected to exchange soiled notes from customers. But banks often lack new notes and require proper identification documents, while some staffers are uncooperative and refuse to change notes.

The central bank has identified bank branches for exchanging currency notes in each state, including 258 across Delhi, it said in an emailed response to questions. The RBI did not reply to any direct questions on the business of banknotes in Old Delhi.

On visiting one of the state bank branches with a torn note, the teller asked this reporter to go to the RBI office. When reminded that her bank is a designated RBI branch, the sullen teller did exchange the note but said: “RBI has put everything on our head”. When another man asked her for two bundles of 10-rupee notes for his brother’s pilgrimage, the teller said no new notes were available. This perpetuates the money changing market, which adjusts its rates depending on the season. Agents outside the RBI office said a bundle of 10-rupee bank notes (valued at Rs 1,000) could cost as much as Rs 1,100 when demand jumps during the festive and wedding season. The same bundle would be priced at Rs 1,020 during shradh, an inauspicious period to make purchases in India, agents said.

In the wedding season, people use newly minted bank notes for gifts, making garlands for the groom and showering money while dancing in marriage processions. The RBI in September appealed to the public to avoid using notes for such purposes as it shortens their life span.

But as Kumar in Old Delhi gears up for a busy wedding season, he said he never wanted his educated son, who works in a school, to join the business.

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