The Reserve Bank of India stopped printing the Rs 2,000 currency note close to five months ago and is currently focusing on printing notes of smaller denominations, including the to-be-introduced Rs 200 note.
A Hindustan Times report says that the RBI is not planning on printing the Rs 2,000 note any further this year. The government had brought in the Rs 2,000 note immediately after demonetisation that scrapped notes of Rs 500 and Rs 1000.
However, since there was not enough liquidity in the market to provide change for the Rs 2,000 note, the printing of more notes of smaller denominations is planned.
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“Most of the printing that’s being done, about 90% is only 500-rupee notes. Nearly 14 billion pieces of new 500-rupee notes have been printed so far,” an RBI official told the newspaper.
Another RBI official confirmed to the newspaper that Rs 200 notes will be in circulation next month and that the printing of the notes was already underway in Mysore.
Earlier, a State Bank of India Ecowrap report had suggested the introduction of new Rs 200 notes to fill in the "missing middle" post almost 9 moths of demonetisation when old Rs 500 and Rs 1000 notes were discontinued and new Rs 500 and Rs 2000 notes were introduced.
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Cash with banks, a CIC component, has however witnessed a decline over November 2016 level, said the report.
The data for June 23, 2017 shows cash in hand with banks declining to 5.4 per cent of the currency in circulation from a high of 23.19 per cent for the fortnight ended November 25 2016, it said.
Going by historical trends, cash in hand with banks is roughly 3.8 per cent of CIC and is currently at 5.4 per cent.
This means at least an additional amount of 1.6 per cent/ Rs 25,000 crore of excess currency may be currently lying in ATMs and herein lies the importance of new Rs 200 notes which could serve as the "missing middle" it said.
The report added that Reserve Bank of India has recently "put orders" for it.
"The cash in hand with banks has been higher compared to the last year, because of demonetisation and the subsequent limits placed on withdrawals for some time. However, now the percentage is showing a decline and reaching pre- demonetisation levels," it added.
The report noted that though there has been a significant move towards relocating distribution of currency towards smaller denominations post demonetisation, there is a mismatch caused by the presence of Rs 2,000 denomination straight after Rs 500 denomination.
Moreover, an ATM machine typically holds 10,000 bills and if these were to comprise say only notes of Rs 100, the number and cost of replenishment goes up significantly.
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"Herein lies the paradox. Notes of Rs 2,000 denomination in ATMs may find few takers because of missing middle/Rs 200 note," the report said.
The Reserve Bank is reportedly expected to introduce Rs 200 notes in the coming months to ease pressure on lower- denomination currencies that are in short supply.
The new notes of Rs 200 should be out before the end of 2017 and will greatly help in narrowing the demand and supply gap in smaller-denomination currency bills.
With PTI Inputs
