Rs2,000 bank notes likely on way out, says SBI report

A year after the high-value Rs2,000 bank notes replaced the demonetised Rs1,000 notes, Reserve Bank of India (RBI) is reported to be in the process of recalling the new notes, says a report.

The Rs2,000 notes, introduced in a hurry to fill the void created by the overnight withdrawal of all Rs1,000 and Rs500 noted on 8 September 2016, could most probably be replaced by lower denomination notes, a report by the State Bank of India (SBI) has said.

While the Rs1,000 notes were withdrawn to escape counterfeiting of the currency, the introduction of the Rs2,000 notes has only made counterfeiting easier, critics have pointed out.

The NDA government led by Narendra Modi in a landmark decision banned Rs500 and Rs1,000 notes to crack down on unaccounted money and counterfeit currency. However, reports say, counterfeiters have found the Rs2,000 notes easier to replicate and handle than the earlier Rs1,000 notes.

The new notes, however, claims to have high security features that could help deter counterfeiting of currency.

Meanwhile, according to a report by the State Bank of India (SBI), the Reserve Bank of India (RBI) has stopped sending Rs2,000 notes or has stopped printing these. RBI, according to the report, is yet to put in circulation Rs264,300 crore of the new Rs2,000 notes.

This has led to speculation whether the central bank is now planning to withdraw the currency from circulation.

A finance ministry report presented in the Lok Sabha states the RBI has printed 16,95,700 crore pieces of Rs500 notes and 365,400 crore pieces of Rs2,000 notes as of 8 December. The total value of such notes translates into Rs15,78,700 crore but the total value of high-value currency in circulation works out to only Rs13,32,400 crore, which means that Rs2,46300 crore of these notes are still being held back.

''This means that the residual amount of high currency notes (Rs15,78700 crore – Rs13,324 crore) of Rs246,300 crore may have been printed by the RBI but not supplied in the market. Therefore, according to SBI Ecoflash report, since using Rs2,000 currency notes brings challenges in carrying out transactions, it seems that the RBI either has stopped printing the Rs2,000 denomination notes or printing in smaller numbers after initially printing them in ample amount to normalise the liquidity situation,'' says a report authored by SBI group chief economic adviser Soumya Kanti Ghosh.