In an effort to deal with cash shortage in certain parts of the country, the government today said the Reserve Bank will increase five-fold the printing of Rs 500 notes.
Speaking to reporters, economic Affairs Secretary Subhash Chandra Garg told reporters the government suspects that Rs 2,000 notes are being hoarded as they are not coming back into the circulation fast enough.
He said, ‘We have taken steps to increase the supply of currency in case demand goes up. The currency printing (will increase) from Rs 500 crore to Rs 2,500 crore per day of Rs 500 note. So in a month, we will be printing about Rs 70,000-Rs 75,000 crore. This should give you assurance that we are geared up to meet the rising demand. There is also a perception that there may be shortage of currency in the future. So people have started withdrawing and it has contributed to the crisis. We keep adequate stock of currency notes, which is one-sixth of the currency in circulation’.
Cash shortage has been reported from Andhara Pradesh, Telengana, Karnataka, northern Bihar and certain other parts of the country, apparently on apprehensions about safety of deposits due to recent spurt in banking frauds.
Observing that there is unusually high demand for currency, Garg said there are multiple factors for this including tendency to hoard cash and it is stronger in some parts of the country.
It should be noted that currency in stock is about Rs 2 lakh crore and the reserves are adequate to meet any unusual spurt in demand. The unusual spurt in currency demand since January was also met through reserves.