He also made it clear that the pre-2005 notes will continue to be legal tender. "This is not an attempt to demonetise. It is an attempt to replace less effective notes with more effective notes. I understand people are making a different interpretations. Unfortunately that should not be the interpretation," he said.
Rajan was answering a question on the RBI's last night decision to withdraw all currency notes printed before 2005, after he delivered the 8th R N Kao Memorial Lecture here. CBI Director Ranjit Sinha had asked him about the significance of the decision coming before the general elections.
An attempt to replace less effective notes with more effective notes
"I have to say that it (withdrawal of notes) has nothing to do with elections which certainly is not the objective," Rajan said. He said there has been a long standing demand that these notes have unfortunately become less secure.
The notes after 2005 have greater security features and the Finance Ministry sought withdrawal of the pre-2005 notes. RBI had yesterday said that after March 31, 2014, it will completely withdraw from circulation all bank notes issued prior to 2005. From April 1, 2014, the public will be required to approach banks for exchanging these notes.