RBI slow on Rs 2,000 notes, holding back Rs 2.6 lakh cr high-value notes

The Reserve Bank of India (RBI) is going slow in printing of Rs 2,000 notes as the cash situation normalises in the economy.

According to its annual report, as on March 2017, these notes constituted 50.2 per cent of all currency in circulation, of Rs 13.102 lakh crore. 

The ministry of finance told the Lok Sabha that as on December 8, the central bank had printed 16,957 million pieces of Rs 500 notes and 3,654 million pieces of Rs 2,000 notes. The combined value of these was Rs 15.79 lakh crore; all currency in circulation was Rs 16.83 lakh crore.  Assuming in March whatever notes were printed by RBI was promptly put out in circulation to ease the cash crunch, the additional notes printed between March and December work out to Rs 73,800 crore in Rs 2,000 notes and Rs 5,53,750 in Rs 500 notes. The total amount is Rs 6,27,550 crore. 

It can be safely assumed that not all of the Rs 2000 and Rs 500 notes printed made way to the public. Even assuming the number of smaller value notes remained constant from their March level of Rs 3,501 crore, it would mean RBI is holding back nearly Rs 2.59 lakh crore in high-value ones. 

As the pattern of printing between March and December showed, most of the notes printed are of Rs 500. So, RBI is going slow on Rs 2,000 notes, both in terms of printing and circulation, says State Bank of India’s chief economist, Soumya Kanti Ghosh.

“As a logical corollary, as Rs 2,000 denomination currency led to challenges in transactions, it seems RBI may have either consciously stopped printing the Rs 2,000 denomination notes or printed in smaller numbers after initially printing in ample amount to normalise the liquidity situation,” he said in a report on the subject. Adding the share of smaller value currency notes, such as Rs 200, Rs 100 and below might have touched 35 per cent of the currency in circulation in value terms. This is an improvement from 26.6 per cent at end-March, by RBI’s annual report.

The Reserve Bank had focused on printing of Rs 2,000 notes in the period after demonetisation (announced November 8 last year). Even in March 2017, the number of Rs 500 notes in circulation was only 5.88 billion. Since then, the central bank has increased the Rs 500 denomination to 16.96 billion of printed currency in December 2017. In March 2016, the number of Rs 500 notes in circulation stood at 15.7 billion.