The Reserve Bank of India (RBI) is likely to decide against circulating proposed new Rs 200 banknotes through ATMs to avoid another chaotic recalibration process similar to the one that followed the recall of high-value currency last November.
The central bank wants to circulate the new banknotes only through bank branches, similar to the way Rs 50 and Rs 10 notes are circulated. The RBI board in March cleared a proposal to introduce Rs 200 notes to plug the paucity of lower denominations. The mints are likely to start printing the new notes from June.
A senior banking official – who refused to be quoted because he isn’t authorised to talk to media – said dispensing new currency notes through ATMs would mean recalibrating India’s 220,000 machines, an exercise that will take more than a month.
These ATMs were just reprogrammed to dispense the Rs 2000 notes introduced on November 9, a period that saw snaking queues outside machines and millions of people unable to withdraw cash immediately.
“The idea is not to disturb the system once again, there has been disruption for more than four weeks between November and December and it is advisable to circulate these notes through the bank branches, though at present these are just proposals,” the official told Hindustan Times.
The proposal to introduce Rs 200 notes is part of a larger focus by the government and RBI on circulating lower denomination currency notes of Rs 100 and Rs 500. “People are still reluctant to take Rs 2000 and therefore there is still a shortage of currency notes and the need is to have lower denomination notes,” said the official. The problem was aggravated because the government and RBI couldn’t circulate Rs 1,000 notes.
In a late-night address on November 8, Prime Minister Narendra Modi withdrew Rs 500 and Rs 1000 notes, sucking out roughly 86% of the cash in circulation. The government’s exercise to replenish the cash in the system is expected to be completed by the middle of April after months of cash crunch, a State Bank of India report said.
A sum of Rs 15.44 lakh crore was sucked out of the system by demonetisation. Before the exercise, Rs 8.58 lakh crore comprised Rs 500 notes and Rs 6.86 lakh crore in Rs 1,000. But with a large chunk of transactions moving to the digital platform and the government aggressively pushing for cashless payments, the RBI need not print currency worth around Rs 1170 crore.