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In Good Ol' Cash We Don't Trust 

Omkar Goswami

AS is the case for most of us, I went to my bank on the first working day of this month to withdraw money for the household. Being an old account holder, I enjoyed the luxury of chatting with the manager, while someone else withdrew the money and politely gave it to me in an envelope. Like a dutiful husband, I deposited the envelope with my wife. Four days later, hell broke loose.

In a bundle of hundred Rs 100 notes, seventy-five were perfectly usable, un-torn notes. The only problem was that these were pretty old notes - ones without the picture of Mahatma Gandhi which were issued at the time when I.G. Patel and M. Narasimham were the venerable governors of the RBI. Since most people, especially shopkeepers, had forgotten what the 'pre-Gandhi' Rs 100 notes looked like, nobody was willing to accept any of them as legal tender. Not a single note was remotely torn, nor was any significantly soiled. It was just a bunch of unfamiliar notes.

The household grocer did not accept them, neither did our maids, nor our driver. My wife painstakingly recalled all the notes and counted them out, after which I went to the bank and got them replaced by more contemporary notes. My bank manager was terribly apologetic, though she had no reason to be. She had, after all, given me perfectly valid legal tender.

This episode made me think on a topic that I have mulled over in the past - on what constitutes 'trust' in different societies. With apologies to Francis Fukuyama, who has written a brilliant treatise on the subject, here is my hypothesis. There are two forms of trust: one that involves trust between known people, and another which is of a far more anonymous form. "I trust my daughter", "My wife trusts me", "I trust my colleague, Vishal", "Gujarati diamond merchants trust each other" are examples of personalised trust where A trusts B because A knows B as a part of the family, or a small organisation in which they belong, or as parts of close kin-linked businesses or occupational groups.

India has very strong bonds of such personalised trust. Developed societies, however, go beyond the personalised form of trust to create and sustain credible institutions that foster anonymous trust. "I trust our judicial system" is a very different fiduciary statement than "I trust my wife". Unfortunately, this is where India fails quite abysmally - and there is no greater example of this than our steadfastly refusing to accept slightly torn or soiled currency notes.

At the end of the day, a Rs 100 note is only a piece of intricately printed, watermarked paper, which has a unique number and a declaration that "I promise to pay the bearer the sum of one hundred rupees". It is not backed by any gold or precious metal. It works only because of anonymous trust. I give it to you as a payment for lunch; you accept it because you trust its validity as a medium of payment.

In no country that I have been to, which includes quite a few developing nations, have I ever seen a shopkeeper or a taxi driver refusing a partially torn or soiled note. I remember asking an Egyptian taxi driver once if he would accept a half-torn note. He looked at me as if I was demented, and couldn't understand why I asked such a question. Egypt is no great shakes as far as public institutions are concerned, but clearly its people trust its currency more than we do. Perhaps we, in South Asia, have lesser faith in our currency than others.

That brings me to another experience in 1978. I was doing some fieldwork in the backwoods of the Garo Hills in Meghalaya, at a time when the state had virtually no electricity whatsoever. The Garo tribals grew succulent pineapples. In the interiors, there were three prices for pineapples: the lowest if you paid by coins, somewhere in the middle if you paid by fresh notes, and highest if the notes were considered soiled. We have progressed since then. Now we have only two sets of prices - the quoted one, if the notes are acceptable, and infinity if they are torn or soiled. That's some trust for you!

Published: Business World, September 2004

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