Why the new Rs 500 note is hard to get

While people have been able to get their hands on the new pink Rs 2,000 note, the coveted new dollar-lookalike Rs 500 notes is still to reach the hands of most of the people.

Written by Kanishka Singh | New Delhi | Published:November 28, 2016 2:42 pm
demonetisation, demonetisation crisis, demonetisation notes, Rs 500 notes, new 500 notes, fake notes, fake currency, demonetisation policy, currency demonetised, currency notes, currency banned, india news, indian express The infusion of Rs 500 has now started, but the preference still seems to for Rs 2,000 notes both in ATMs and banks.

Demonetisation has sucked out massive amounts of liquidity from the system in terms of old currency notes of Rs 500 and Rs 1,000 denomination. While people have been able to get their hands on the new pink Rs 2,000 note, the coveted new dollar-lookalike Rs 500 notes is still to reach the hands of most of the people. RBI data reveals that before demonetisation a little over 9000 crore pieces of currency notes were in circulation. Around 86 per cent of that value of currency was sucked out in the form of Rs 500 and Rs 1,000 notes.

The dearth of Rs 100 notes and short supply of the new currency notes has made it tough for people to manage day to day payments where digital options are useless at the moment.

The government insists that adequate amount of notes were printed in advance to ensure the liquidity sucked out of the system is restored with the new currency quickly. However, it is tough to accept this when it comes to the new Rs 500 notes. The RBI and the government have said that printing Rs 2,000 notes started much in advance. It seems the calculation was that injecting Rs 2,000 notes in huge quantities would help kickstart the liquidity restoration process faster. The infusion of Rs 500 has now started, but the preference still seems to for Rs 2,000 notes both in ATMs and banks.

The trouble with the Rs 2,000 notes is that citizens are not easily able to find shopkeepers, vegetable sellers and other vendors willing to part with precious change of smaller denominations as balance for payments made with the high-value notes. Some shopkeepers keep the Rs 2,000 note and ask the customer to consider the remainder as advance payment for future purchases.

A lot of the trouble here seems to be the fact that the Finance Ministry is calling the shots and not RBI as is the norm. Former Finance Minister P Chidambaram has come on record to say the printing presses in India have a capacity to print maximum of 300 crore pieces of currency notes a year, that too if they work round-the-clock. He said it would take seven months to restore the amount of liquidity taken out of the system.

If Chidambaram’s assessment –the veracity of which hasn’t been refuted by the government– is right, it would be fair to conclude that the problem of cash crunch is here to stay for a while, not just 50 days. Incidentally, the RBI prints notes at four locations–Mysuru, Nashik, Devas (Madhya Pradesh) and Salboni (West Bengal). The Rs 2,000 notes are printed at the Mysuru press, while the Rs 500 notes are being pushed out from the Nashik and Devas press. Salboni press prints primarily the lower denomination notes like Rs 100.

The currency after printing has to travel from the press to currency chests maintained by the RBI across several locations in the country. The money then travels from these chests to banks and ATMs. Manpower is an issue and logistics is another hurdle given the secrecy and high security needed.

The question now is whether the government is transporting “adequate amounts of currency” to restore liquidity. Maybe there just aren’t enough of these Rs 500 notes printed.

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    Confucius
    Nov 28, 2016 at 1:29 pm
    something is amiss here! If only 300 crore pieces can be printed in a "year" as the report says, even 3000 crore pieces will take 10 years (that is just 1/3rd, let alone 86% of 9000 crore pieces) and from where did Mr Chidambaram get a figure of 7 months?
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      D P
      Nov 28, 2016 at 11:55 am
      If it were deliberately slowed, it will be a hard-nosed decision, to encourage non currency payments.
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        Shree
        Dec 8, 2016 at 4:50 pm
        500 rs New notes are yet to be printed for circulation. hope this wok will be finished before next parliamentary election.
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        1. S
          SubbuI
          Nov 28, 2016 at 12:33 pm
          Mohmad Bin Tughlaq was a better planner than this Nalayak Prime Minister.
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            Deshu
            Nov 28, 2016 at 10:29 am
            It is really surprised to see as how RBI Govt Urjit Patel kept mum on Demonetization and just yesterday he said something on it keeping quite for 20 days.As A matter of fact the Reserve Bank of India has the sole right to issue currency notes except one rupee notes which are issued by the Ministry of Finance. Currency notes issued by the Reserve Bank are declared unlimited legal tender throughout the country. The Credit is controlled by the Reserve Bank in accordance with the economic priorities of the government.It also controls banking system in India.As such it is duty of RBI Governor to come forward and explain the position to Public and not by the Finance Minster Arun Jaitley.
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              Balakrishnan
              Nov 28, 2016 at 12:28 pm
              Most of the cash was anyways under the mattress and in lockers. So all the cash need not be restored again immediately. Only cash that was in circulation needs to be printed in a hurry and 50 days is enough for that
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                SATISH
                Nov 28, 2016 at 12:55 pm
                But Tughalaq is busy protesting in Delhi instead of governing Delhi.
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                  ketan
                  Dec 9, 2016 at 12:25 pm
                  when the rupees 500 NEW note will come? After new Govt ?
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                    keshava
                    Nov 28, 2016 at 10:36 am
                    The intention may not be to replace all notes. It may be to coax people to adopt to cashless transactions
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                      krishna
                      Dec 6, 2016 at 4:01 pm
                      It is evident that the govt miserarably failed to es the requirement, 20 days back there was announcement with much publicity about new 500 rs notes to be released but we hardly find any new 500 Rs note . If the shortage continues for months together the govt may slowly lose the overwhelming support that it has received initially
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                        shilpy
                        Dec 13, 2016 at 5:33 pm
                        the word liquidity is totally misused here. the liquidity remains as before for those who are doing it digitally. lt;br/gt;mr. chidmabar is wrong to think that the same full amount of notes will be restored. lt;br/gt;the fact is people will not use, and will not need, notes much, not even 25 pct of what was taken out. think, people. we know corrupt congressis can not. lt;br/gt;india is getting out of the old congressi-india of corruption, counterfeiting and over-lording by govt, like it is ridding itself of plague. lt;br/gt;india is stepping into the new modern world of real freedom and fairness, it is soon going to be among the top nations of the w world. know your real human worth, which requires no less, and join the yagna.
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                          rajeev patel
                          Nov 28, 2016 at 1:37 pm
                          to restore the liquidity of such huge amount of money flowing in market , rs. 2000 note be beneficial for government but not public, as arun jetli announces rs 1000 rupee note will came in market soon with new colour and new design
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                            rajeev patel
                            Nov 28, 2016 at 1:37 pm
                            to restore the liquidity of such huge amount of money flowing in market , rs. 2000 note be beneficial for government but not public, as arun jetli announces rs 1000 rupee note will came in market soon with new colour and new design
                            Reply
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                              Shamsungfan
                              Nov 28, 2016 at 12:26 pm
                              there no need to replace w currency removed with new. It can be done easily in 50 days.
                              Reply
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                                Santanu Roy
                                Nov 28, 2016 at 1:45 pm
                                I am not aware of the relevant rules and regulations but can't the government makelt;br/gt;arrangement with some foreign governments to print additional 100 rupee notes on it'slt;br/gt;behalf?That would have been the ideal solution
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                                  sai ansh
                                  Nov 28, 2016 at 1:20 pm
                                  Dear author: leave aside tall claims of Chidambaram. If more people start using digital payment methods (as many are doing), do we still then need the same amount of currency notes? For small day-to-day transactions, the situation is getting better day by day.
                                  Reply
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                                    sai ansh
                                    Nov 28, 2016 at 1:20 pm
                                    Dear author: leave aside tall claims of Chidambaram. If more people start using digital payment methods (as many are doing), do we still then need the same amount of currency notes? For small day-to-day transactions, the situation is getting better day by day.
                                    Reply
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                                      sai ansh
                                      Nov 28, 2016 at 1:21 pm
                                      Good one!
                                      Reply
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                                        Sanchayan Sarkar
                                        Nov 28, 2016 at 3:47 pm
                                        That is a disastrous solution . No foreign interference should be done on printing currency
                                        Reply
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                                          sawan
                                          Nov 28, 2016 at 12:57 pm
                                          It appears that the PM has taken the advice of the Bhakts. No need of knowledge in economics or finance needed here. These subjects are going to be stopped in colleges and the post of the economic advisor is going to be abolished soon.
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                                            s s nair
                                            Nov 28, 2016 at 12:58 pm
                                            Now no one will say Modi did not act against corrupt and Modi acted against terrorists. People are much comfortable than telling he is corrupt and encouraging terrorism. They now fear that if they speak about corruption, Modi will demonitise even Rs.100 and 50 notes. So it is better to support him till all the cash is withdrawn from banks.
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