What happens to demonetized notes collected in banks?

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Everything is clear till the part where demonetized currencies are exchanged in the local banks. But what’s the story after that? According to RBI around 17.7 lakh crore is the net worth of currencies in India as of records before November 8th. Of which, 85% comprised of denominations in 500 & 1000.  As of March 31st statistics, 9026.6 crore rupees were in circulation across the country, of which 2203 crores comprised of  500’s and 1000’s which all on sudden was ceased and withdrawn from the market. To see the fate of these collected notes let us run down the procedures followed by RBI’s.
Well, these currencies are deposited in Issue offices of the reserve bank of respective states, where they are reckoned and accounted. Next is the process of sorting, where a keen scrutiny is done in order to deem the currencies as Reusable or Non-Reusable. RBI uses the Currency Verification and Process System (CVPS), which is a machine that can sort between soiled and unsoiled notes. The machine is efficient enough to sort through 50000~60000 notes per hour, which was once a human labor intense task.
The reusable batch goes straight away into the further monetary examination and towed back into cash flow system. In the present scenario, these currencies are sent for re-processing and used for making new currency paper. The non-reusable batch is taken for recycling process, whose initial step comprises of shredding the currencies. Currency notes are fed into a large shredder, which cut the notes into tiny bits. These bits of paper is pressed down to a 100 gm briquette using a high-pressure hydraulic machine, for easy transportation. In the past rather than this process, the shredded notes were straight away incinerated, but on studying the environmental effects it seemed that incineration created pollution & was not an eco-friendly process.
These briquettes are sold through tenders to local companies at a rate as low as INR 6/ Kg. These companies recycle this briquette into writing pads, paperweights, files, calendrers, additives in cardboard, plywood etc. On an average 800 ton of briquettes are manufactured every year. In the light of recent demonetization, 100 times more currency was collected in which soiled ones are made into briquettes and sold as low as INR 250/ metric ton. Also, these briquettes are sold through the RBI outlets as souveniers.
Western Plywood operating in the Kannur district got a tender from RBI, Thiruvananthapuram to purchase briquettes for 250 rupees per metric ton.  According to the chairman of the company, they got this tender even before November 8th and they have been practicing this technique for the past few years. Adding processed paper will increase the bulk of the plywood, at the same time improves the integrity and strength of the boards manufactured.  The best part is that Trivandrum RBI paid for the transportation costs here. Similar practices are seen in other states too. Some companies in Mumbai use this briquette to make pulp for manufacture corrugated cardboard box, which is extensively used in packaging. RBI has received appreciation from various parts of the country for effectively discarding the useless bank currencies. Rather than burning the precious paper, now it is turned into something useful !

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