Mumbai: The Reserve Bank of India (RBI) stopped printing ₹ 2000 notes about five months ago and is unlikely to print more in the current financial year, said people aware of the development. The central bank, however, has stepped up the printing of other denominations, including new ₹ 200 notes, the people added on condition of anonymity.
About 3.7 billion ₹ 2000 notes amounting to ₹ 7.4 trillion have been printed, said one of the people cited above. That more than compensates for the 6.3 billion ₹ 1000 notes that were withdrawn after Prime Minister Narendra Modi’s demonetisation move on 8 November 2016.
“Most of the printing that’s being done, about 90% is only ₹ 500 notes. Nearly 14 billion pieces of new ₹ 500 notes have been printed so far," this person said.
That is also close to the 15.7 billion of old ₹ 500 notes (amounting to ₹ 7.85 trillion) withdrawn from circulation after 8 November.
RBI data shows that currency in circulation stood at ₹ 15.22 trillion as on 14 July, eight months after demonetization. This is about 86% of the ₹ 17.7 trillion that was in circulation on 4 November.
Separately, RBI’s printing press in Mysuru has also started printing the new ₹ 200 notes, which are likely to come into circulation next month, according to a second person.
“Initially, around a billion ₹ 200 notes are expected to hit the market," this person added.
The central bank did not respond to an email seeking comment.
The new batches of ₹ 500 notes are expected to ease the shortage of ₹ 2000 notes in circulation that is being reported in certain parts of the country. The Economic Times first reported this shortage on 20 July.
“The cash crunch which existed till two months ago has now eased with RBI increasing supply of ₹ 500 notes over the last 40 days," said Neeraj Vyas, deputy managing director, State Bank of India (SBI). “But we have also seen a sharp drop in the supply of ₹ 2000 notes during this period."
RBI is possibly keeping the supply of ₹ 2000 bank notes low because the central bank wants to get the right mix, according to SBI chief economist Soumya Kanti Ghosh. In the initial days of remonetisation, RBI had focused on ₹ 2000 notes to quickly increase currency in circulation.
A 19 July report from SBI’s economic research wing showed that cash on hand with banks is high at 5.4% of currency in circulation compared with 3.8% pre-demonetisation. This shows that there is excess cash lying in ATMs or bank branches, most of which could mostly be ₹ 2000 notes, concluded the report.
“Although we haven’t see any drop in supply of ₹ 2000 notes, we expect it to be moved out of ATMs once ₹ 200 notes hit the market," said Radha Rama Dorai, country head, ATM and allied services, at ATM service provider FIS.