Rs 2,000 notes are disappearing, bankers suspect they’re being hoarded for elections

Shortage in Rs 2,000 currency notes possibly due to increased hoarding of high value banknotes, especially with approaching Lok Sabha elections.

Two thousand rupee banknotes (representational image) | Photo: Dhiraj Singh | Bloomberg

New Delhi: Over two years after the Modi government’s controversial move to introduce them, high denomination currency notes of Rs 2,000 are fast disappearing from circulation.

While the Reserve Bank of India (RBI) had halted printing of fresh Rs 2,000 banknotes earlier, as ThePrint reported in January, analysts say the current shortage could be due to increased hoarding of the high value notes, especially with Lok Sabha elections approaching.

“Circulation of currency notes of Rs 2,000 has dramatically dropped, the supply has thinned but the existing banknotes that are already in the system are also not getting exchanged,” a senior government official told ThePrint on condition of anonymity.

“This typically happens during elections, but at the same time we cannot rule out hoarding of unaccounted cash by the citizens,” said the official.

However, a senior RBI official said there is “no shortage of cash”.

“Keeping in mind the demand, our focus has been to supply lower denomination currency notes and that includes Rs 200. ATM recalibration exercise is underway and banks are monitoring it,” said the central bank official who didn’t wish to be named.

‘Proportion of notes has fallen’

In February, the State Bank of India (SBI)’s Ecowrap report had revealed that high currency notes were still in demand. It had said about 78 per cent of currency in circulation until mid-January comprised high denomination banknotes of Rs 2,000 and Rs 500.

The SBI report had also noted that there was a possibility that “currency of higher denomination/Rs 2,000 is not getting adequately circulated in the economy”.

Two top private sector bankers told ThePrint that the overall proportion of high denomination banknotes in the currency basket has fallen further.

A senior government official said, “There is some generation of black money in new currency notes and the taxmen are aware of this, the department is doing its job.”

Prime Minister Narendra Modi’s 8 November 2016 demonetisation exercise was aimed at weeding out black money and counterfeit currency notes. The Rs 2,000 notes were introduced as part of the exercise.

Most ATMs not dispensing Rs 2,000 notes

A Confederation of ATM Industry (CATMi) official said the supply of Rs 2,000 notes for ATMs has reduced. Further, about 50 per cent of India’s 2.2 lakh ATMs are still to be recalibrated for dispensation of Rs 200 currency notes, instead of Rs 2,000.

“Supply of Rs 2,000 notes has come down, though most ATMs are still not equipped to dispense Rs 200 banknotes. In the process, reloading of ATMs with cash has increased,” said CATMi director V. Balasubramanian.

An ATM has four cassettes, one each dispensing currency notes of Rs 100 and Rs 2,000, while two cassettes are used for Rs 500 banknotes.

With reduced supply of Rs 2,000, most ATMs are drying up faster as the designated cassette for the highest denomination notes is not being filled at all.

As the general elections approach closer, this could eventually lead to faster drying up of ATMs during the polls, though there is no shortage of overall cash in the system, said the private bankers.