Former Secretary at the Department of Economic Affairs (DEA) Subhash Chandra Garg has claimed that a large chunk of Rs 2,000 currency notes have been hoarded by people and are not in circulation.
Rs 2,000 bank notes account for about one-third of currency in circulation in value terms. They were circulated by the Reserve Bank of India (RBI) in November 2016 after demonetisation of Rs 500 and Rs 1,000 notes.
"A good chunk of Rs 2,000 notes are actually not in circulation, having been hoarded. Rs 2,000 note, therefore, is not presently working as a currency of transaction," he wrote in a blogpost.
"It can be demonetised without causing any disruption. A simple method, depositing these notes in the bank accounts (no counter replacement), can be used to manage the process."
Cash is past its hey-days, although for a very different reason it is making a comeback in countries with negative interest yielding deposit rates and bond yields, said Garg in the elaborate note on policy measures India need to undertake to make it a 5 trillion dollar economy by 2024-25 and reach the 10 trillion dollar mark by early 2030s.
Garg added that he left the note with senior functionaries of the government before exiting his office on October 31.
Very convenient digital modes of making payments are replacing cash at a fast pace, he said, but India has still a long way to go with more than 85 per cent payment transactions in the country still taking place in cash.
"The pace has to be accelerated. Making large cash-based transactions costlier and subject to some tax or charge, making digital modes of payments available at all times and more and more convenient and stopping cash handling in the government completely will help transition our country to less cash and to no cash economy."
Garg said the Payment and Settlement Act needs to be reformed and modernised. "The RBI needs to move beyond the banks and involve all other payment infrastructure participants in this business of making payments digital. A more participative regulatory system for payments needs to be put in place."
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)