RBI stops printing Rs 2000 notes and focus printing on Rs 200 note?

The secret wars on banknotes continue in India. It was never clear from the RBI Board meeting when Rs 2000 was issued. Likewise, as news started doing the rounds of launch of Rs 200 note, there was no clarity again on whether and which Board meeting cleared the issue of Rs 200 note.

Both cases of issuance of Rs 2000 and Rs 200 notes, these were new denominations. Section 24 of RBI Act says:

2[24. Denominations of notes.
(1) Subject to the provisions of sub-section (2), bank notes shall be of the denominational values of two rupees, five rupees, ten rupees, twenty rupees,
fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other
denominational values, not exceeding ten thousand rupees, as the Central Government may, on the recommendation of the Central Board, specify in
this behalf.

(2) The Central Government may, on the recommendation of the Central Board, direct the non-issue or the discontinuance of issue of bank notes of
such denominational values as it may specify in this behalf.]

Thus, they can only be started when Central Board clear them and then Government declares them as legal tender. So we neither knew when Rs 2000 was cleared nor we know when Rs 200 was cleared.

On top of that, this recent news says RBI has stopped printing Rs 2000 and will now only focus on Rs 200:

The Reserve Bank of India (RBI) stopped printing Rs 2000 notes about five months ago and is unlikely to print more in the current financial year, said people aware of the development. The central bank, however, has stepped up the printing of other denominations, including new Rs 200 notes, the people added on condition of anonymity.

About 3.7 billion Rs 2000 notes amounting to Rs 7.4 trillion have been printed, said one of the people cited above. That more than compensates for the 6.3 billion Rs 1000 notes that were withdrawn after Prime Minister Narendra Modi’s demonetisation move on 8 November 2016

“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,” this person said.

That is also close to the 15.7 billion of old Rs 500 notes (amounting to Rs 7.85 trillion) withdrawn from circulation after 8 November.RBI data shows that currency in circulation stood at Rs 15.22 trillion as on 14 July, eight months after demonetization. This is about 86% of the Rs 17.7 trillion that was in circulation on 4 November.

Separately, RBI’s printing press in Mysuru has also started printing the new Rs 200 notes, which are likely to come into circulation next month, according to a second person “Initially, around a billion Rs 200 notes are expected to hit the market,” this person added.

Is this true? Again, if printing of Rs 2000 notes has stopped this has to be approved by the RBI Central Board and we should be informed.

Defacto, the Government and RBI can pretty much do anything without letting us know. But then all this noise about central bank transparency is not just limited to MPC, rate hikes and rate cuts. All these decisions to issue new denominations, discontinue existing ones has a lot of impact on people and being a public institution should be disclosed to people.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: