In three years, RBI pulls out over 900 mn notes of Rs-2,000 denomination

Rs-2,000 notes comprised only 2% by volume of total floating currency notes as of March 31, 2021, compared with 3.3% in 2018

The Rs-2,000 note introduced in 2016 following the demonetisation exercise, is slowly being withdrawn from the system, indicating the Reserve Bank of India (RBI) intention to reduce dependency on high-value bank notes in circulating currency.

There were 3,363 million notes of Rs-2,000 denomination in circulation as of March 2018. According to latest data released by the Reserve Bank of India, the number of such notes fell to 2,451 million as of March 31, 2021. This means 912 million bank notes of this denomination have been pulled out by the central bank. The share of Rs 2,000 note was 2 per cent in terms of volume as of March 31, 2021 and 17.3 per cent in terms of value.

“These notes would have come back to RBI as soiled notes which the central bank destroyed,” said a former deputy governor on the condition of anonymity.

“That time (2016-post demonetisation) the Rs-2000 note was introduced for quick value. The printing capacity was limited, so in order to have a higher value, launching of a Rs-2,000 note was thought of. But that was not fitting in the overall scheme of demonetisation. It was a temporary arrangement,” the official said.

The data shows, RBI disposed off 454.8 million pieces of soiled Rs-2,000 notes in 2020-21 as compared to 176.8 million pieces the previous year.

The demonetisation exercise of November 2016 rendered almost 87 per cent of the currency in circulation invalid, as Rs 1,000 and the old Rs 500 note were withdrawn from the system.

As at end March 2017, there were 3,285 million pieces of Rs 2,000 note, constituting 3.3 per cent of the total volume of currency and 50.2 per cent of value. The number of such notes rose to 3,363 million though the share fell to 37.3 per cent in value terms by March 2018, since the new Rs-500 bank note had more than doubled its share by value in one year. From 2018 onwards, there was a secular decline in the Rs 2,000 note’s share both by value and volume.

During 2020-21, the value and volume of banknotes in circulation rose by 16.8 per cent and 7.2 per cent, respectively, as against an increase of 14.7 per cent and 6.6 per cent during 2019-20, RBI data released on Thursday showed.

In value terms, the share of Rs-500 and Rs-2,000 banknotes together accounted for 85.7 per cent of the total value of notes in circulation on March 31, 2021, versus 83.4 per cent a year earlier. In volume terms, the Rs-500 denomination had the highest share at 31.1 per cent followed by the Rs-10 notes (23.6 per cent) on March 31, 2021.

The share of Rs 500-notes in the total floating volume has been rising the past three years.

Bank frauds

The total number of frauds reported by banks in India in 2020-21 was Rs 1.38 trillion as compared to Rs 1.85 trillion the previous year, down 25 per cent, RBI data showed. The total number of frauds reported by the bank in FY21 was 7,363 as compared to 8,703 the previous financial year.

“The share of public sector banks in total frauds (both, by number and value) dropped, while that of private sector banks rose during the corresponding period,” RBI said in its annual report. Most of the frauds have been occurring in the loan portfolio.

A Business Standard report published on Monday showed that bank frauds hit Rs 4.92 trillion cumulatively as on March 31, 2021. The data, obtained under the Right to Information Act, showed 90 banks and financial institutions reported a total of 45,613 cases of loan fraud till March 31, 2021.