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Is Indian government discontinuing Rs. 2,000 notes?

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Is the government planning to stop printing Rs. 2,000 notes? Will their circulation be discontinued? Well, we officially don’t know yet. There’s no announcement as such but a lot of factors hint towards it.

The government has not issued any orders to print currency notes of Rs. 2000 denomination to the presses in the current financial year. However, there is still no decision taken to halt the currency printing on official levels, said Mr. Anurag Thakur, Minister of State for Finance in a written reply to a query raised in Lok Sabha recently. He also said that currently there is no proposal by the government to drop the Rs. 2000 notes from economic circulation.

Mr. Thakur, in a statement, said that so far the country has Rs. 7.4 lakh crore worth of printed Rs. 2000 notes bring circulated in the economy. The cumulative face value of these notes in circulation and currency chests was Rs. 5.49 lakh crore and Rs. 0.93 lakh crore respectively till 5th March 2020.

 

Why did SBI and Indian Bank reconfigure ATMs for Rs 500 and Rs 200 notes?

The State Bank of India (SBI) and the Indian bank have issues instructions to reconfigure the ATMs (Automated Teller Machines) for currency notes of Rs. 200 and Rs. 500 notes. This is because:

  • The country has a higher circulation of currency notes of Rs. 500 and Rs. 200 denominations.
  • Inconvenience is being faced by people all over the country in exchanging Rs. 2000 currency notes

As a result of the above-mentioned factors, both the banks have taken this decision.

What is the total currency circulation currently?

As of 5th March 2020, the total number of Rs 10, Rs 20, Rs 50, and Rs 100 denomination notes in domestic circulation are as follows:

  • Rs 10: 30510.79 million pieces
  • Rs 20: 8309.84 million pieces
  • Rs 50: 8556.84 million pieces
  • Rs 100: 19624.77 million pieces

How does the government decide how many notes are to be printed?

The minister said that the number of banknotes to be printed is dependent on the quantum of demand in the economy for more currency to be printed to adjust for inflation in the economy. However, apart from this, there are other factors as well which are taken into consideration while deciding the quantum of currency to be printed such as replacement of soiled banknotes, reserve stock requirements, and GDP growth.

Lately, the government has received several queries about whether it has stopped printing the new Rs. 2,000 notes. In a reply to them, Mr. Thakur said that the printing of paper money is decided cumulatively by the Government and The Reserve Bank of India (RBI). The aim of this consultation is to make sure that the desired denomination mix is maintained in the economy for stabilizing demand and supply.  

Why are we talking about the withdrawal of Rs. 2000 notes if there is no such official declaration?

The printing of notes has been temporarily halted due to the ongoing precarious situation. The Reserve Bank of India had earlier informed the same.

The activity of producing the notes at Bhartiya Reserve Bank Note Mudran Private Limited (BRBNMPL) was suspended from March 23, 2020, until May 4, 2020, when the printing resumed.

Mr, Thakur also mentioned that the minting process carried out by the Security Printing and Minting Corporation of India Limited (SPMCIL) had also been affected due to the coronavirus pandemic.

Moreover, no indent was placed with these presses minting Rs 2000 denomination notes for 2019-20.

What about cash? Is carrying cash good or bad?

Even after the digitalization of currency, we are pretty much dependant on cash for our daily transactions. The cash we use every day holds a high cost in various indirect forms such as-

  • We pay cash to access cash. For example, while going to the ATM or bank or anywhere else to disburse cash.
  • We pay a considerable amount of time when it comes to collecting, maintaining, and dealing with cash.
  • We pay for it in the form of the risk of loss of threat we take.

According to a research, residents of Delhi together spend nearly 60 lakh hours and 9.1 crores just to obtain cash. 

But what does this have to do with Rs. 2000 note?

This logical explanation becomes more relevant when we talk about Rs. 2000 note, the highest denomination currency in circulation currently.

One of the major objectives of the government while rolling out this currency was to offer cost benefits. For example, if the RBI now wants to push in Rs. 10,000 in the economy, it can easily do so by printing just 5 notes which would reduce printing costs.

Moreover, ATMs can hold a higher value of money with high denomination notes. Everything looked pretty well.

However, on the contrary, the system caused more trouble than ease. The process to offload the currency was pretty expensive and the cost of transactions was also high. In fact, in some cases, it had become so difficult to obtain change that people paid more money just to simply exchange the high denomination note.

Because of similar reasons, banks are not much in favor of pushing them and RBI has stopped printing them. ATMs do not seem to have such notes now.

It would be really shocking to know that the Central Bank aka the RBI has not printed even a single Rs. 2000 note since June 2018.

What would happen if these notes actually go off?

Again, it would depend upon whom you’re asking.

A lot of people would say it is for good. According to a report, a high denomination currency helps people to evade taxes, commit crimes, give/receive bribes and finance illegal activities or terrorism as cash gives one the benefit of anonymity, unlike digital transactions that record every single detail of the sender and receiver. High denominations assist is the easy and economical movement of huge sums of money. The government, in turn, loses a hell lot of revenue due to these transactions.

Although, there are several people who think the new note has simplified their payment processes as well as cash handling expenses.

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