Indian banks have issued new currency notes worth Rs 4.61-lakh crore in the month through December 10, logging a pace that will not help the government replenish much of the cash it pulled out of the economy by December 30.
During the same period banned bills of Rs 500 and Rs 1000 returned by the people amounted to Rs 12.44-lakh crore, the latest Reserve Bank of India data on demonetisation showed. The total cash pulled out of circulation by the government was about Rs 14-lakh crore.
Banks have issued a total of 21.8 billion pieces of notes till December 10. Of these, 20.1 billion pieces were of Rs 10, 20, 50 and 100s, and 1.7 billion of Rs 2000 and Rs 500.
- Prime Minister Narendra Modi declared on November 8 that the existing 500- and 1000-rupee notes (86% of India’s currency in circulation) would be replaced with the aim of fighting corruption. He said the notes were being stripped of their status as legal tender, a process that is known as demonetisation.
The government’s shock recall of 500-and 1000-rupee bank bills on November 8 has unleashed a severe cash crisis and resulted in long, chaotic queues at bank and ATMs. Given that money is short in supply, banks have been virtually rationing it.
The crux of the problem is change, specifically the Rs 500 note, which the RBI’s four presses cannot, currently, print in adequate number.
An extrapolation of 2016 RBI data on the capacity of Indian printing presses and currency distribution indicates that, at current levels, Prime Minister Narendra Modi’s 50-day deadline to replenish currency stocks will not be met.
If the government wants to introduce Rs 9-lakh crore – or 35% less money than it recalled – it will take up to May 2017, and if it wants to reintroduce the entire Rs 14-lakh crore that it withdrew, that could take up to August 2017, shows an analysis by data mining firm IndiaSpend.
An HT analysis also shows it will take the RBI at least four months to print the required new notes and several weeks more to get them into the system.
The Rs 500 bill is the most popular currency as it is highly fungible across transactions. But while the government says it has released enough currency notes into the system, many feel otherwise.
About 68% of respondents to a poll by LocalCircles, a citizen engagement platform, said they had not yet received a Rs 500 note.
Rs 500 bills were circulated on a small scale by the RBI in the week after demonetisation. Volumes were increased in late November even as more of the highest denomination Rs 2000 bills were printed.