RBI Scales Down Printing of Rs 2000 Currency Note to 'Minimum'

Roman Schwartz
January 4, 2019

The comment comes a day after a top finance ministry official said the printing of Rs 2,000 banknote, introduced post-demonetisation in November 2016, has been reduced to the "minimum" by the Reserve Bank of India. He claimed that the government had chose to reduce the printing of Rs 2,000 notes at the time of their launch itself. Rs 2,000 notes were introduced after the government banned the old Rs 500 and the Rs 1,000 denominations on November 8, 2016.

The report revealed that the share of Rs 2000 notes has come down to 37.3 per cent in March 2018, down by 13 per cent from 50.2 per cent as of March 2017. This was immediately followed with the introduction of Rs 2,000 note by RBI the same evening.

According to a report in The Print, the decision was taken as the government felt the high-denomination banknotes were being used for tax evasion, hoarding and money laundering.

It's up to the RBI to sustain within the margin of the new notes available and Rs 2000 notes going out of the market might not be a good sign for the foreign institutional investors.

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In December 2017, an SBI Research report had said that the RBI might either be holding back Rs 2,000 notes or could have stopped printing high denomination currency. However, the cut in circulation doesn't translate into the note being deemed invalid.

The critics included bankers, with Uday Kotak, the managing director of Kotak Mahindra Bank, questioning the government's move to bring in Rs 2,000 notes while phasing out Rs 1,000 notes.

The old Rs 500/1000 notes that were scrapped due to demonetisation accounted for around 86% of the total currency in circulation at that time.

As of March 2018, the total currency in circulation was Rs 18.03 lakh crores. The Income Tax department also seized caches of Rs 2,000 notes during this period.

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