With old Rs 1,000 notes having been demonitised, the Reserve Bank of India will issue new ones in the same denomination in next few months with better security features, colours and designs, economic affairs secretary Shaktikanta Das said on Thursday.
The central bank will also gradually replace other currency notes below R100 as well in coming months, but without cancelling the ones in circulation, he said.
Referring to the carefully executed plan behind scrapping of R500 and R1,000 notes, Das said: “The planning process started a few months back. Very few people were involved (from the government and the RBI),” Das said.
As only 2/3 design people from the RBI were involved to maintain secrecy, it was decided to print R2,000 notes to ensure more old R500 and R1,000 notes were exchanged quickly, Das said. Besides the logistical reason, inflation in the last 15 years also contributed to the decision to go for Rs 2,000 notes, he added.
India is among the most cash-intensive economies in the world, with a cash-to-GDP ratio of about 12%, almost four times that of Brazil, Mexico and South Africa, according to analysts.
Responding to a question from FE, finance minister Arun Jaitley on Thursday said the current exercise of demonitisation would help reduce India’s cash-GDP ratio. Chief economic advisor Arvind Subramanian said the ratio would also favourably be impacted by anti-black money measures taken by the government in the past several months.
According to RBI data, R500 and R1,000 notes together account for R14.2 lakh crore in value terms, which is 86.5% of the total R16.4 lakh crore of total notes under circulation as of March 31, 2016. Volume wise, Rs 500 and 1000 notes rose from 1,649 crore pieces in March 2014 to 1,874 crore pieces (22.4% of total notes in circulation) in March 2016.
The supply of new currency notes in large volume in coming weeks will increase the business potential of logistics firms, which transport cash for banks and fill ATMs.
Rituraj Sinha, president of the Cash Logistics Association (CLA), said: “The CLA has advised all member companies to remain on standby till RBI/banks issue further instructions regarding currency management operations, particularly replenishment of ATMs.”