1. You Are At:
2. Home
4. Around 6 months needed to replenish Rs 500 notes, here is the math

# Around 6 months needed to replenish Rs 500 notes, here is the math

## Will the new notes of Rs 500 and Rs 2000 which replace the demonetised currency of Rs 500 and Rs 1000 find itself in circulation soon?

India TV Business Desk, New Delhi [Published on:17 Nov 2016, 8:22 PM IST]

Prime Minister Narendra Modi announced last week to demonetise Rs 500 and Rs 1000 notes, declaring them “worthless piece of paper” and requested people to bear a few days of “inconvenience.”

A few days later, when the situation worsened and the queues outside banks and ATMs got only longer, the Prime Minister sought 50 days from the people.

But the question is if 50 days will be enough for new notes to be printed and brought into circulation? Will the new notes of Rs 500 and Rs 2000 which replace the demonetised currency of Rs 500 and Rs 1000 find itself in circulation soon?

Unlikely, if the capacity of all the currency printing presses in the country is taken into account.

The latest calculation, based on capacities of the currency printing presses, shows that replenishment would take around six months.

This is particularly true for the new Rs 500 notes, whose printing, presumably, started after November 10. Till those are replenished in adequate numbers, the "currency pain" would not go away since Rs 2,000 notes are difficult to exchange for lower denominations.

However, enough of the new Rs 2,000 notes may already have been printed, calculations show.

The central government had demonetised Rs 500 and Rs 1,000 currency notes on November 8, sending the whole nation into a tizzy. Long queues outside banks have been a daily occurrence since then because enough currency notes are not available with them.

New information gleaned from public sources show that the government may be too optimistic in claiming that "adequate amount" of money would soon be in circulation.

That's because of the limited capacity of the printing presses in the country for such a sudden, huge job.

There are four currency presses -- one each in Nashik (Maharashtra), Dewas (Madhya Pradesh), Salboni (West Bengal) and Mysuru (Karnataka).

The first two are owned by the central government through the Security Printing and Minting Corporation of India Ltd. According to information available in the Finance Ministry's latest annual report, the yearly currency printing capacity of these two presses is around 40 per cent of the total in the country.

The other two presses -- in Salboni and Mysuru -- are part of the Bharatiya Reserve Bank Note Mudran Pvt. Ltd. (BRBNMPL), a wholly-owned subsidiary of the Reserve Bank of India (RBI). These two, comprising 60 per cent of the total capacity, can print 16 billion notes in two shifts per year, according to information available on BRBNMPL's website.

In essence, it means that total capacity in the country would be 26.66 billion notes in two shifts. If all three shifts run, as the government says is happening now, the four presses would be able to print 40 billion notes a year, irrespective of the denomination.

Now, according to the government, the total money in circulation -- before Rs 500 and Rs 1,000 notes were declared illegal -- was Rs 17.54 lakh crore or Rs 17,540 billion. Of this, 45 per cent was in Rs 500 denomination -- equivalent to Rs 7.89 lakh crore or Rs 7,890 billion and 39 per cent in Rs 1,000 notes amounting to Rs 6.84 lakh crore or Rs 6,840 billion.

In other words, there were 15.78 billion notes of Rs 500 denomination in circulation and 6.84 billion notes of Rs 1,000.

But if they are going to print Rs 2,000 notes equivalent to value of the Rs 1,000 notes declared illegal, that is, worth Rs 6.84 lakh crore, they would have to print only half, or 3.42 billion notes.

If the printing started in early September, as has been claimed by some printing press officials, they would need only a little over two months to meet the full requirement, even at 50 per cent capacity. In other words, they should have printed all the replacement needs of Rs 2,000 notes till now.

Further, how long will they need to print Rs 500 notes, now that the machines would not be printing Rs 2,000 notes? Assuming an 80 per cent run (remember Rs 500 and Rs 1,000 comprised 84 per cent of all currencies), the time taken for the new Rs 500 notes, which began printing, presumably, on November 10, would be: 5.9 months.

The rest of the 20 per cent capacity could be used for the lower denomination notes from Rs 5 to Rs 100.

So, by April-end, one would presume, all the new notes would be in circulation. And, of course, the pain would be longer than the 50 days that Prime Minister Narendra Modi has mentioned.

(With IANS inputs)

Promoted Content