The government has decided to replace the existing set of Rs 500 currency notes and completely abolish the Rs 1000 denomination. PM Modi announced that the RBI will introduce Rs 2,000 as a new denomination in India.
This according to the government will curb black money in the country. Currently Rs 17,54,000 crore worth of notes are in circulation according to the RBI’s database on the Indian economy. Of this Rs 500 notes constituted almost 45% of the currency in circulation while 39% of the notes were of the Rs 1,000 denomination. In value terms.
However in terms of volume, Rs 10 and Rs 100 notes constituted 53% of the notes in circulation.
This measure would mean that from midnight, almost Rs 6,32,600 crore in circulation in the form of Rs 1,000 notes would be illegal tender. To replace them, Rs 2,000 notes would be introduced, which according to the government would be limited in circulation.
Now people will head to banks to replace their old Rs 500 notes and get new currency for their Rs 1,000 denominations. Figures show that the strongest currency chest in India is with the State Bank of India (SBI), which has 1965 of them. Currency chests determine the amount of bank notes supplied by the RBI to various banks. Nationalised banks meanwhile have 1,173 chests while SBI’s affiliates have 757 chests. Private banks have 160 chests. Considering the greater number of currency chests in state owned banks, the number of people heading to these banks would be far greater. That would mean a greater footfall at these nationalised banks when they open on November 10.
RBI data shows that in 2015-16, almost 6.5 lakh counterfeit notes were detected in commercial banks of which almost 4 lakh were in the Rs 500 and Rs 1,000 category. It is in this context that the government wants to re-monetise the Rs 500 note while de-monetizing the Rs 1,000 note. But the number of Rs 100 counterfeit currency were also close to 2 lakh this year. So although a bold step, the government will still have to ensure that Fake Indian Foreign Currency (FICN) in the denominations still in circulation do not proliferate like they have been allowed to in the past.