Audit finds mismanagement of old Rs500 currency notes by SBP

'Out of the total 1.3 billion Rs500 notes printed from 1985 till 2012, SBP had maintained the record of only 431 million notes'

ISLAMABAD: Record of the old and discarded Rs500 currency notes, worth approximately Rs7.5 billion, was not available with the State Bank of Pakistan (SBP), the Auditor General of Pakistan (AGP) has revealed, recommending action against those responsible for non-maintenance of the record.

The Auditor General of Pakistan, in its special audit report on SBP for the years 2008-09 to 2013-14, stated that process for the destruction of old currency note was carried out in the backdrop of a complaint which alleged that Rs500 currency notes returned by the people were valued at over Rs7.5 billion.

Upon verification, audit officials were shocked over the revelations of missing record pertaining to old Rs500 currency notes, sources privy to the matter said.

During the special audit of SBP, the AGP observed that on December 27, 2010, the Finance Division had declared that the old-designed (bigger-sized) banknotes of Rs500 shall cease to be legal with effect from October 2, 2012. As a result of this policy, all the old-designed banknotes of Rs500 were required to be surrendered to SBP for destruction by the cut of date (October 1, 2012).

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SBP, in a statement, has denied reports regarding unavailability of the record of old design Rs.500 banknotes demonetized in Oct 2012. “The destruction of banknotes is an ongoing activity and is carried out across the country at field offices of SBPBSC, the record for the same is available in respective field offices,” it said. 

“The Audit team however, just visited SBPBSC Karachi and assumed that the record available at Karachi is the total record available with the SBP, which is factually incorrect. The complete record of banknote’s destruction is available at SBPBSC field offices located in 16 cities across the country,” stated SBP.

In order to scrutinise the destruction process, the audit called for the relevant record from the SBP. In response, only a few printed currency notes of Rs500 were produced for audit.

“Out of the total 1,306 million Rs500 notes printed by SBP from 1985 till Oct 2012, SBP had maintained the record of only 431 million destructed pieces, which were destroyed after the demonetization policy. The central bank did not maintain the record of the remaining 875 million pieces and no reconciled figures were produced for audit,” the AGP report read. “In the absence of the relevant record of remaining Rs500 note, the audit could not ascertain whether the value of new currency notes issued was in excess of the value of notes destroyed.”

The AGP stated that with no reconciled record of destroyed notes, the “chances of exchange of fake currency against demonetized old notes at the counters could not be ruled out”.

Although the AGP had reported the matter regarding the absence of the remaining 875 million pieces to the SBP management, no reply was received until finalisation of the audit report.

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Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected]
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