What is the lifespan of paper money?
Have you ever wondered how long a paper note remains in circulation and what happens afterwards? Here is the answer to your queries
Suppose you have three banknotes in your wallet. The notes were released in 2021, 2022, and 2023 respectively. All three notes are battered, but interestingly, the note issued last is more damaged than the one released in 2021.
You may often come across newer notes in a more damaged state than those released earlier and wonder how long these paper notes actually last.
The answer is: on average, six months.
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Now, you might be thinking, if paper money's lifespan is this short, why do you often come across notes that are perhaps five to ten years old? This is because you may have kept a note with care for 30 years, for example, but when a note issued yesterday gets drenched in water today, it is wasted [damaged beyond use].
"New notes are often destroyed in 15 days. What is their longevity, then? How much of my currency has remained intact for 30 years? One or two notes can't indicate a trend," Mezbaul Haque, an executive director of Bangladesh Bank, told TBS in an interview.
Around Tk500–Tk600 crore is spent on printing paper money each year. But as the notes reach the end of their lifespan so soon, what happens to them once they are too damaged for public usage? There are two ways damaged notes are addressed. In both cases, the paper money's final destination is the Bangladesh Bank.
Firstly, people stuck with damaged notes often exchange them with the footpath exchangers in Gulistan. The exchangers take them to Bangladesh Bank; there is a specific refund policy based on how much of the note is damaged.
However, the primary method of disposing of wasted notes in Bangladeshi banks is through the vaults of various banks. The banks deposit their money with Bangladesh Bank. There is a guarantee vault concept with the central bank.
"Suppose Sonali Bank comes with Tk100 crore. This bank has a guarantee vault with us where it will deposit the money. We will keep that amount in the guarantee vault and credit Tk100 crore to their account. All the banks deposit money in the guarantee vault like this," Mezbaul said.
These notes are taken out of the vault and assigned to the note examination hall for counting in the presence of representatives from each bank. The re-issuable notes are returned to the exchange vault again, but the notes that are not re-issuable are taken to the destruction process by burning.
The central bank also employs auto-sorting machines in the process, which tear apart the Taka notes that are not re-issuable. The amount of taka destroyed is deducted from the supply.
"Taka in our stock is just paper, as long as it doesn't come out in a formal process. I don't assign assets against it when it is in the stock vault. When we take it to the exchange vault from the stock vault, my accounting process begins since equivalent assets are assigned against it," Mezbaul said. "It now becomes a currency."
