Paper Money

Lower demand means fewer 2,000-rupee notes in India

The number of 2,000-rupee notes, the reviled highest denomination for India, has been falling in circulation in recent years, as the denomination is replaced by notes with lower face values.

Images courtesy of Reserve Bank of India.

India’s 2,000-rupee fiasco may be nearing a merciful end. It is reported that the Reserve Bank of India did not print any of its reviled highest denomination, equal to $27.30, in 2019 and 2020. The reason, according to a Right to Information inquiry filed by India Today, was that the bank did not receive any orders for them.

The note came into existence when the government suddenly announced the demonetization of old 500- and 1,000-rupee notes on Nov. 8, 2016. These two denominations accounted for 86 percent of the total currency in circulation at the time.

The action was attributed to a wide array of motives, including removing black-market money from the economy and making India a cashless economy. The result, though, was that millions of people, some of whom did not even own a cell phone or have a bank account, lost their life savings, kept in cash, overnight.

A government official who refused to allow his name to be used told India Today that the 2,000-rupee notes were introduced in 2016 as “the need of the hour” to quickly fill the gap created by the demonetization.

It was a big gap. The number of 2,000-rupee notes in circulation was 3.36 billion pieces in 2017 and 2018, about 50 percent of currency in circulation. It dropped to 3.29 billion in 2018 to 2019, and to 2.73 billion in 2019 to 2020.

In total, 3.5 billion of the notes were printed in 2016 to 2017, just 151 million in 2017 to 2018 and 47 million in 2018 to 2019. In the meantime, more than half of the 22 billion currency notes printed in 2019 to 2020 were new 500-rupee notes.

There are conflicting statements about the note’s future. One official said, “This does not mean that there is any move to discontinue Rs 2,000 notes. Increasingly, commercial banks are also using more and more smaller notes (there are also new 100 and 200 rupees) because their customers often find difficulties in getting change for Rs 2,000 notes.” He added that digital transactions are lessening the need for the 2,000-rupee note. There are also reports that banks will no longer put them in ATMs.

A follow-up India Today article on Swaminathan Gurumuthy, a Reserve Bank of India board member and an accountant, said that 2,000-rupee notes would be gradually phased out in the years to come. He called the 2,000-rupee issue a “bridge” because the government could not print smaller denominations fast enough. They will be withdrawn gradually, and in his opinion, “Indian currency should have 500 as its highest-denomination followed by 250 and 100.”

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