19th January, 2020

Is Government Taking 2000 note Out From Circulation?

In what may disturb the Indian spending once again, it is reported that the Reserve Bank of India (RBI) may be holding back Rs. 2,000 notes. It is alos possible that RBI has already stopped printing the high denomination currency.

Hint by SBI Report

An SBI Research report by SBI Ecoflash said that “we observe” that the small denomination currency “in circulation” up to March 2017 was valued at Rs 3,50,100 crore. The report also says that the Ministry of Finance told in the Lok Sabha recently, the RBI has printed 1,695.7 crore units of Rs 500 notes and 365.4 crore units of Rs 2,000 notes as on December 8.

The total value of such notes amounts to Rs 15,78,700 crore. The amount in the higher denominations amounts to Rs 13,32,400 crore. The residual Rs 2,46,300 crore may have been printed by the RBI but not supplied in the market.

The report added, “it is safe to assume” that  2,46,300 crore rupees may be on the lower side. This is because the RBI may have printed notes of small denomination in the denomination of Rs 50 and Rs 200.

It is also logical as 2,000 denomination currency led to challenges in transactions. Hence, RBI may have either consciously stopped printing the 2,000 denomination notes or is printing smaller numbers of the highest denomination after initially printing it in ample amount to meet the liquidity demand.

Higher smaller currency in circulation

The report suggests that the share of small currency notes may be 35 per cent in value terms. AT the time of demonetisation, the higher denominations of 1000 and 500 together accounted for 86-87 per cent of the currency in circulation.

Now the RBI, for the first time, has also introduced a Rs 200 note in smaller currency.