MUMBAI – The Central Bank of India announced on Friday that India will start collecting the highest denomination notes in circulation. Economists say the move could boost bank deposits at a time of high credit growth.
The removal of the 2,000 rupee (SGD32.44) banknote will not cause disruption “neither to normal life nor to the economy,” said Trev Somanathan, a senior finance ministry official, but the four big states in the late game held prior to elections in The winner of this year’s Grand Prize will be voted nationally in Spring 2024.
Most of India’s political parties are believed to hoard cash in high-denomination bills to cover campaign costs to circumvent strict spending limits imposed by the Electoral Commission.
The Reserve Bank of India (RBI) announced its withdrawal, saying it had evidence that its face value was not commonly used for trading.
The notes will remain legal tender, but people will be asked to deposit them and convert them into smaller denominations by Sept. 30, he added.
The RBI added in a statement that “stocks of banknotes of other denominations will continue to be sufficient to meet the national demand for currency.”
The 2,000 rupee note was introduced in 2016. Government led by Narendra Modi suddenly abolished 500 rupee and 1000 rupee notes Efforts to keep counterfeit goods out of circulation.
Although there is little evidence that the plan was successful, the move overnight robbed the economy of 86 percent of the value of currency in circulation, creating a systematic cash shortage.
The government began issuing new 500 rupee banknotes a few days later and added 2,000 rupee banknotes to replenish the currency in circulation at a faster pace.
Since then, however, the central bank has focused on printing notes under 500 rupees and has not printed new 2,000 rupee notes in the last four years.
Pronab Sen, an economist and former chief statistician of India, said the elimination of high denomination banknotes was “a smart form of de-monetization”.
Karthik Srinivasan, senior vice president of financial sector ratings at ICRA, said bank deposit growth “could improve slightly in the short term.”
“This could ease upward pressure on deposit rates and help keep short-term rates in check,” he said.
Indian banks have reported double-digit credit growth in recent months despite the RBI interest rate standing at 250 basis points since last May. Banks are raising deposits at a faster pace to meet rising demand and tighter liquidity.Reuters
https://www.straitstimes.com/asia/south-asia/india-to-withdraw-2000-rupee-notes-from-circulation India to stop circulation of 2000 rupee notes