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RBI stops printing Rs 2,000 notes; Rs 200 note may hit market next month

The Reserve Bank of India (RBI) has stopped printing the Rs 2,000 currency notes and will not be bringing new notes of that denomination in the current financial year, according to a Livemint report on Tuesday.

Officials of the central bank reportedly told the newspaper that the RBI had also accelerated the process of printing the Rs 200 currency notes. The new notes are expected to start circulating by next month.

“About 3.7 billion Rs 2,000 notes, amounting to Rs 7.4 lakh crore, have been printed; that more than compensates for the 6.3 billion Rs 1,000 notes that were withdrawn after demonetization on 8 November 2016,” Livemint said, citing an RBI source.

The RBI has reportedly already started printing the first batch of Rs 200 note in June to ensure easy currency availability in the country.

In fact a report by SBI even says that the introduction of Rs 200 note will fill in the “missing middle” even as the new currency in circulation (CIC) has already reached 84 per cent of the pre-demonetisation level.

The 19 July report from SBI’s economic research wing showed that cash on hand with banks was high at 5.4 per cent of currency in circulation, compared with 3.8 per cent before demonetisation. This shows that there is excess cash lying in ATMs or bank branches, most of which could mostly be Rs 2,000 notes, according to the report.

The SBI report noted that though there had been a significant move towards reallocating the distribution of currency towards smaller denominations after demonetisation, there was a mismatch caused by the presence of Rs 2,000 denomination straight after Rs 500.

The new notes of Rs 200 should be out before the end of 2017 and would greatly help narrow the demand-supply gap in smaller-denomination currency bills, it said.

Besides, an ATM machine typically holds 10,000 bills and if these were to comprise, say, only Rs 100 notes, the number and cost of replenishment would go up significantly.

“Herein lies the paradox. Notes of Rs 2,000 denomination in ATMs may find few takers because of the missing middle/Rs 200 note,” the report said.

Last week, the Economic Times had reported that eight months after demonetisation and the introduction of new currency notes, bankers felt there was now a drop in the circulation of Rs 2,000 notes. The report had added that the supply of Rs 2,000 notes from the RBI had declined recently, leading to the speculation that there might be a deliberate plan to limit the supply of these notes.

State Bank of India Chief Operating Officer Neeraj Vyas had told ET, “We are receiving currency notes from the Reserve Bank in the denomination of Rs 500 in high-value currency”, and that the Rs 2,000 notes were only coming in as a result of recirculation.

Business Standard had earlier this month reported that RBI would issue the new Rs 200 notes to tide over the shortage of low-denomeination notes, in some parts of the country.

“It will also help in bigger transactions. You can give change for Rs 2,000 in ten Rs 200 notes rather than twenty Rs 100 notes,” said an official, adding that the notes should be in circulation by the end of 2017.