Why RBI has stopped fresh stock of Rs 2000 notes and pulled out 57 crore worth notes in FY21?

The Reserve Bank of India has been reducing the circulation of 2000 rupee notes in the country. The country has seen a drop of 27% of its 2000 notes from circulation. Let’s look at why the RBI has stopped the fresh stock of 2000 notes and pulled out notes worth 57 crores in the FY21.

INR 2000 Notes in the Market
Why has RBI stopped Fresh supply of INR 2000 notes?
Increase in the number of other notes
Market share of INR 500 and INR 10 notes
FAQ

INR 2000 Notes in the Market

The number of Rs 2000 notes in the Indian economy has been reduced in the year 2021 from its peak in 2017-18. In the year 2017-18 the number of notes circulated in the Indian economy was around 33,630 lakh and in March 2021 it has reduced to 24,510 lakhs.

In the peak, the value of Rs 2000 notes is expected to be around INR 6.72 lakhs which has dropped to 4.90 lakhs in March 2021. The number of 2000 notes that are removed from the market is around 9,120 lakhs and has a value of around INR 1.82 lakh crore.

Why has RBI stopped Fresh supply of INR 2000 notes?

The latest annual report which was published by the RBI doesn’t convey any news about the missing notes. However, it is to be noted that the RBI has stopped producing the Rs 2000 notes as the notes are not coming back to the banks.

These high value notes are not available for people in the ATMs as well. It is estimated that the Rs 2000 notes are majorly hoarded in the form of black money as they have high value and require lesser space compared to a bundle of Rs 500 notes.

The estimated amount of black money which experts had predicted not to come back to the system during demonetization was around 4-5 lakh crores.

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Increase in the number of other notes

There is a growth of 10-12% for the money which is being circulated in the country from the past few years. The RBI has increased the circulation of other low valued denomination notes such as Rs 500 and Rs 200 in the market.

The annual report of the RBI has conveyed that the circulation of notes in the country has seen an increase of around 16.8 % and 7.2 % in the year 2020-21 when compared to the increase of around 14.7 % and 6.6 % in the year 2019-20.

In terms of value, the share of Rs 500 and Rs 200 notes in the country during the year 31 March 2020 was around 83.4 % and has increased to around 85.7 % in the total market value of bank notes in circulation for the year 31 March 2021.

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Market share of INR 500 and INR 10 notes

The Rs 500 notes had a total volume has seen an of around 31.1 % as of 31 March 2021, when compared to the previous year of 25.4 %. The INR 10 denomination bank notes have seen a downfall in their total value which had a share of 23.6 % as of 31 March 2021 when compared to the previous year's value of 26.2 %.

However, it is to be noted that the RBI has increased the production of INR 500 denomination notes and is trying to replace them with INR 2000 notes. In terms of the volume, Rs 500 recorded the highest volume which was followed by INR 10 notes for the year 2021.

Conclusion

The Rs 2000 notes’ main purpose was to ease the shortage of money supply during the demonetization and now the supply has reached a position where the central bank has become uncomfortable as the higher value note will be easier to hoard.

FAQ

Are 2000 rupee notes going to be banned?

No, RBI has announced that they will not issue a fresh supply of 2000 notes but there is no official notice by RBI of it getting banned.

Why 2000 Rs note is not issued by RBI?

As per the reports it is estimated that the Rs 2000 notes are majorly hoarded in the form of black money as they have high value and require lesser space compared to a bundle of Rs 500 notes.

Which note is going to ban?

Recently, a report claimed that the central bank was planning to ban ₹5, ₹10, and ₹100 notes.