RBI may be holding back Rs 2,000 notes, Here’s the reason!

Reserve Bank of India may either be holding back Rs 2,000 notes or could have stopped printing high denomination currency, according to a latest SBI research report, authored by SBI’s chief economist, Soumya Kanti Ghosh.

The value of Rs 2,000 notes were Rs 7,308 billion as on December 8, while the value of small denomination currency in circulation up to March 2017 was Rs 3,501 billion, according to RBI’s annual report.

RBI had printed 16,957 million pieces of Rs 500 notes and 3,654 million pieces of Rs 2,000 notes as on December 8, according to information from the ministry. The total value of such notes amounts to Rs 15,787 billion. This implies that the value of high denomination notes was equivalent to Rs 13,324 billion as on December 8 after netting out the small denomination notes from the currency in circulation on December 8.

“This means that the residual amount of high-value currency notes of Rs 2,463 billion may have been printed by the RBI but not supplied in the market,” says that report.

“As a logical corollary, as 2000 denomination currency led to challenges in transactions, it thus indeed seems that RBI may have either consciously stopped printing the 2000 denomination notes/or printing in smaller numbers after initially it was printed in ample amount to normalise the liquidity situation,” the author observed in the report. “This also means that the share of small currency notes in total currency in circulation now may have touched 35 percent in value terms,” the report said.