To meet the "unusual" currency demand in the country, the government has decided to increase printing of Rs 500 notes by five times, Economic Affairs Secretary Subhash Chandra Garg said here on Tuesday.
"We have taken steps to increase the supply of currency in case the demand were to go up further. To give you an example, Rs 500 notes -- we print about 5 billion of notes per day. We have taken steps to raise this production five times," Garg said at a press meet called to calm fears after reports of currency shortages emerged from several parts of the country.
"Very soon, in the next couple of days, we will have a supply of about Rs 25 billion worth of Rs 500 notes per day. In a month, supply would be about Rs 700-750 billion. These notes alone can more than meet the demand of any month," he said.
Garg asserted that there was no cash crunch in the country, pointing out that currently around Rs 18 trillion worth of currency was in circulation -- a little over what was in circulation at the time of demonetisation.
"We keep Rs 2.5-3 trillin more currency in stock for excess demand. In the last few days, we have pumped cash into the system to meet the demand. We still have a reserve of Rs 1.75 trillion."
He said there was "unusually high demand" for currency in the last couple of months. As opposed to an average demand of about Rs 200 billion a month, "in the first 13 days of April itself there was a demand of Rs 450 billion", he said.
Garg attributed this sudden cash demand to localised phenomenon.
"This unusual spurt in demand is seen more in some parts of the country like Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh and Bihar," the Finance Ministry said in a statement on Tuesday.
"We have noted that this is coming more from some parts of the country. There might also be some sort of a feeling in some people that if the cash runs out, why not keep it in reserve so it may be safe... a kind of 'shortage mentality'. But believe us, there is no shortage, there is no cash crunch," he said.
"There is no shortage of notes in stock, there is no shortage of cash being printed... Therefore I would urge... every citizen not to hoard or stock cash -- it is not required. You are unnecessarily raising your risks. We have adequate cash, but the preferable mode of use is digitisation, so use it," Garg added.
Asked whether there was any hoarding of the Rs 2,000 notes, he said: "In this system, there are about 6.70 lakh crore worth of Rs 2,000 notes. They are more than adequate to meet the transaction demand of customers... But, off late, we have noted somewhat lesser inflow coming back from circulation.
"We have not got this investigated, but you can assume that this one note is most suitable for people to keep with themselves. There has been some tendency of some people using Rs 2,000 notes, but that does not affect the overall supply of the Rs 2,000 notes."
Justifying the higher currency circulation in the system compared to the pre-demonetisation period, Garg said: "At the time of demonetisation, the currency in circulation Rs 17.5 trillion. Currency in circulation now is about Rs 18 trillion. So it is in absolute numbers higher than at the time of demonetisation."
"But demonetisation is one-and-a-half years earlier... if we had taken that growth path, we would had still been much higher. If the currency had grown as it was growing before demonetisation, probably it would have been somewhere at the level of Rs 22-23 trillion. So, we are at a lower level."