According to a report by Livemint, the Reserve Bank of India (RBI) has not printed Rs 2,000 notes for about five months now and is “unlikely to print more in the current financial year”. In the meantime, the central bank has reportedly stepped up the printing of Rs 200 notes, which are likely to be put into circulation next month.
“Most of the printing that’s being done, about 90% is only Rs 500 notes. Nearly 14 billion pieces of new Rs 500 notes have been printed so far,” Livemint’s source said on condition of anonymity. “Initially, around a billion Rs 200 notes are expected to hit the market.”
The move is seen as a gradual phasing out of the Rs 2000 notes to make room for the new Rs 200 notes. The reported halting of the Rs 2000 note does not mean that the note has no legal tender.
On 8 November 2016, Prime Minister Narendra Modi announced the demonetisation of all Rs 500 and Rs 1,000 banknotes of the Mahatma Gandhi Series – essentially, 87% of India’s currency. The notes were replaced with new Rs 500 notes and Rs 2000 notes.
Current status of the cash crunch caused by demonetisation
Demonetisation caused a massive cash crunch across the country. According to the government and the central bank, however, that cash crunch has more or less been compensated.
“The cash crunch which existed till two months ago has now eased with RBI increasing supply of Rs 500 notes over the last 40 days,” Neeraj Vyas, deputy managing director, State Bank of India (SBI), was quoted by Livemint as saying. “But we have also seen a sharp drop in the supply of Rs 2000 notes during this period.”
Today, around nine months after demonetisation, 15.7 billion of old Rs 500 notes have been reportedly replaced almost completely by the 14 billion of new Rs 500 notes.
RBI data shows that currency in circulation stood at Rs 15.22 trillion as on 14 July, which is about 86% of the Rs 17.7 trillion that was in circulation before the note demonetisation.
Rs 200 notes to be introduced next month
The Rs 200 notes will reportedly be introduced next month. A billion of these new notes are expected to hit the market initially, thereby easing the strain on Rs 500 note supply.
Some economists argue that the new Rs 200 notes will lead to the gradual, natural demonetisation of the Rs 2000 notes, which some argue was introduced in November 2016 mainly to increase currency in circulation.
No response from government in Parliament
Raising the issue of whether the Rs 2000 notes will be pulled from circulation, Opposition members in the Rajya Sabha demanded clarification from the government on Wednesday, 26 July.
Raising a point of order during the Zero Hour, Naresh Agrawal (SP) said, “The government has taken a decision to scrap Rs 2,000 note. The RBI has been given order not to print the Rs 2,000 notes … If any policy decision been taken during the Parliament Session, the tradition is to announce it in the House.”
Finance Minister Arun Jaitley, however, did not respond.
The Logical Indian community requests the government to clarify the status of the Rs 200 notes and on the future of the Rs 2000 notes. If a second pseudo-demonetisation is coming our way, it is in the best interests of the people and the government if the country is prepared for it.