1. To get back to normal after demonetisation, India needs 1,200 cr new Rs 500 notes

To get back to normal after demonetisation, India needs 1,200 cr new Rs 500 notes

Post demonetisation, logistics and printing of new currency appear to be the key challenges for the RBI/government to restore business as usual in the economy.

By: | Published: November 29, 2016 6:19 AM

Post demonetisation, logistics and printing of new currency appear to be the key challenges for the RBI/government to restore business as usual in the economy. Of the Rs 14 lakh crore demonetised while Rs 6 lakh crore has been deposited with banks, only Rs 1.5 lakh crore of the new currency has been withdrawn/exchanged till date and a large share of this has been in Rs 2,000 notes which are not ideal for transacting.

While as per reports, 150 crore Rs 2,000 notes have been printed, lack of an adequate “transactional” currency is still continuing 15 days after demonetisation and it appears unlikely to resolve in the next couple of weeks, with only Rs 2.2 lakh crore of residual currency (other than Rs 500/1,000) in circulation.

To get back to normal transaction volumes we estimate up to 1,200 crore new Rs 500 may be needed. Industry estimates indicate that until last week 40 crore of the Rs 500 notes were printed. While total printing capacity is estimated at 10 crore notes per day, the printing capacity of Rs 500 notes appears constrained at 4-5 crore per day.

The Rs 2,000 note is not an ideal transactional currency. This note being high value and with remaining currency <15% of the total currency, it is unable to provide enough liquidity to transact.

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