Shocking! Cash Circulation Increased During Lockdown; 90 Crore Rs 2000 Notes Pulled Out
RBI reported that there was a rise in circulation of banknotes in 2020.
Increase In Note Circulation
The rise of 7.2% of the total volume of circulated banknotes can be attributed to people preserving cash for the pandemic.
The RBI said that it made efforts to cater to demands of the people for cash as a precautionary measure.
It said in its Annual Report for 2020-21 that “concerted efforts were made to ensure that Currency Chests (CCs) remain adequately stocked with all denominations of banknotes in order to maintain timely supply of fresh banknotes across the country”.
Rs-2,000 Denomination Note Pull Out
As of March 2018 3,363 million notes of Rs-2,000 denomination were in circulation.
But the figure has fallen as of March 31, 2021 to 2,451 million.
That means a difference of 912 million banknotes which the central bank withdrew from circulation.
An insider speculated that the notes in question might have been soiled and unfit for use and hence was destroyed by the central bank.
No More Supply Of Rs 2,000 Notes
RBI said that it had not supplied any fresh Rs 2,000 notes in 2020-21.
The value of the Rs 2,000 notes has also dropped to Rs 4.90 lakh crore.
At its peak its value stood at Rs 6.72 lakh crore.
But it did increase the supply of Rs 20 notes from 13,390 lakh pieces in 2019-20 to 38,250 lakh pieces in 2020-21.
RBI reported that notes of Rs 500 denomination had the highest share of volume at 31.1%.
Rs 10 denomination banknotes come in second place with 23.6% of volume.
The combination of Rs-500 and Rs-2,000 banknotes have contributed 85.7% of total value of notes in circulation.
The Rs 500 note is experiencing an upward trend in terms of total floating volume since the last 3 years
RBI To Adopt Modern Tech
RBI will discuss with a consultant the induction of modern technology and automation of banknote processing, handling and the technical support required to do so.
By introducing modern technology the RBI wants to automate the process of receipt, storage, processing and destruction of banknotes and increase efficiency of currency management function.
The RBI is exploring this avenue at a time when increased currency circulation has also meant an increase in soiled notes returning to the central bank.
Hence, there is a strong need for automating certain aspects of cash management and the handling of banknotes which modern technology can help with.