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BANKING

The missing Rs.2000 notes

Print edition : Apr 08, 2022 T+T-
Currency note of Rs.2000 denomination.

Currency note of Rs.2000 denomination.

A queue outside a State Bank of India branch in Ramanathapuram in December 2016, as people brave the rain to withdraw money a month after demonetisation.

A queue outside a State Bank of India branch in Ramanathapuram in December 2016, as people brave the rain to withdraw money a month after demonetisation.

The Rs.2000 currency notes introduced at the time of the 2016 demonetisation are hardly seen anymore, and there are concerns whether they are being used to hoard black money.

W hen was the last time you held a pink currency note of Rs.2000 in your hand? Frontline asked this question to several people and got the same reply: many months or possibly more than a year ago.

Anecdotal evidence would have us believe that the currency notes of Rs.2000 denomination, introduced at the time of demonetisation in 2016, have more or less disappeared from the market. The notes can scarcely be seen in circulation. The automated teller machines (ATMs) rarely dispense them, and they seem to be fading from banks as well. A perception gaining ground among citizens is that the notes are fuelling the black economy and have been hoarded by crooks and racketeers.

To unearth the facts behind this disappearance, Right to Information activist Manoranjan S. Roy has written to Prime Minister Narendra Modi requesting a Central Bureau of Investigation (CBI) inquiry into the matter. In his letter, a copy of which has been marked to President Ram Nath Kovind, Reserve Bank of India (RBI) Governor Shaktikanta Das and Finance Minister Nirmala Sitharaman, Roy has expressed misgivings on the RBI’s books of accounts.

According to Roy, as per the RBI’s annual report, the supply of Rs.2000 notes from the three currency presses—Bhartiya Reserve Bank Note Mudran Private Limited Bangalore, Nashik Currency Note Press and Bank Note Press Devas—is different from the circulation figures shown in the report. The circulation of Rs.2000 denomination notes as shown by the RBI far exceeds the supply of the notes as reflected by the RBI from the three printing presses.

From 2017 to 2021, the RBI released 1,217.33 crore pieces of Rs.2000 notes in the market. Yet they are not to be seen in the market. So then, where are the notes? This is the question that Roy has asked the government to probe. Even if one were to take into account the fact that the RBI would have disposed of some notes because they were soiled and worn out, a large quantity of notes should still be circulating in the market. These high-value currency notes are easy to store. If there is a possibility that hoarding of black money is taking place, then an impartial inquiry must be held, said Roy in the letter, which was co-signed by Advocate Sachin Manohar Bandkar.

Also read: Politics at its cynical worst

Contrary to the RBI’s reports, last year, the government suggested that it had discontinued the printing and circulation of Rs.2000 currency notes. In March 2021, the then Minister of State for Finance Anurag Singh Thakur informed the Lok Sabha that Rs.2000 notes had not been printed for two years. In a written reply, Thakur said 3,362 million currency notes of Rs.2000 denomination were in circulation on March 30, 2018, constituting 3.27 per cent of the currency in terms of volume. As of February 26, 2021, 2,499 million pieces of Rs.2000 notes were in circulation, constituting 2.01 per cent of bank notes in terms of volume.

“Printing of banknotes of a particular denomination is decided by the government in consultation with the RBI to maintain the desired denomination mix for facilitating transactional demand of the public. During the years 2019-20 and 2020-21, no indent has been placed with the presses for printing of Rs.2000 denomination banknotes,” Anurag Singh Thakur said.

He was responding to a question posed by Avinashi Ganeshamurthi of the Marumalarchi Dravida Munnetra Kazhagam; the MDMK MP had asked whether the government was aware that the circulation of Rs.2000 notes among the people was very low and that these notes were not even available in many banks and ATMs.

By November 2021, the Rs.2000 denomination note comprised only 1.75 per cent of total bank notes in circulation, down from 2.01 per cent just eight months ago. Pankaj Chaudhary, the present Minister of State for Finance, said in a written reply in the Rajya Sabha: “As against 3,363 million pieces of Rs.2000 denomination bank notes in circulation on March 31, 2018, constituting 3.27 per cent and 37.26 per cent of notes in circulation in terms of volume and value respectively, 2,233 million pieces were in circulation on November 26, 2021, constituting 1.75 per cent and 15.11 per cent of notes in circulation in terms of volume and value, respectively.”

Also read: Wrecking the system

In January 2019, Roy filed a public interest litigation (PIL) petition in the Bombay High Court after the Central Economic Investigation Bureau under the Finance Ministry ignored his application for a probe.. His petition stated that the RBI collected more Rs.500 and Rs.1000 notes than what was in circulation at the time of demonetisation.

After studying the RBI’s annual reports from April 1, 2000, to March 31, 2018, obtained under RTI, Roy found that in the said period, currency notes of Rs.500 and Rs.1000, totally amounting to Rs.14.11 lakh crore, were in circulation in the Indian economy.

But within a short span of time after demonetisation in 2016, the banks had collected notes of Rs.15.28 lakh crore. This was Rs 1.16 lakh crore in excess. Roy sought a court-monitored probe by an independent investigation agency in the matter.

Roy said he filed the petition as “there is huge fraud going on from so many years”. He said the “public’s tax money” was on the line and there was a need to review the actual position.

Moreover, citing RBI reports and other documents obtained under RTI, Roy said that the RBI seemed to have destroyed more notes than it printed. According to him, between 2000 and 2018, the RBI destroyed soiled currency notes in excess to the ones printed annually by four printing presses. The petition said: “Over the years consistently, the number of currency notes destroyed are more than the notes printed by the printing presses. The difference runs to millions of currency notes of all denominations.” During 2000-2018, 37,523 million pieces of Rs.500 notes were printed but 39,875 million pieces were destroyed, according to his petition.

On February 26, 2020, the Bombay High Court noted that one of the grievances of the petition was that soiled currency notes destroyed were in excess of the legally printed number. The court directed that the RBI be added as a respondent in the matter.

Also read: ‘Demonetisation does nothing to stop generation of black money’

The direction came after the Central government’s counsel Hiten Venegaonkar pointed out that the litigation was primarily against the RBI and yet but the bank was not party to it.

Roy’s letter has rekindled the debate on the virtue of the demonetisation exercise announced in a peremptory fashion by the Prime Minister on November 8, 2016. Five years after the old Rs.500 and Rs.1000 notes were demonetised and a new currency note of Rs.2000 was introduced, the move continues to reek of a monumental blunder. Almost every Indian, at the time, was forced to queue up outside ATMs and banks in a desperate attempt to withdraw money. Many died while standing in those queues. The move effectively removed more than 85 per cent of the currency notes in circulation at the time. The Rs.2000 note was pumped into the market in large quantities to balance out the paucity created by the move.

The Modi government coined a new catchphrase, Digital India, peddling the dream of making India cash-free. Yet, into the sixth year after demonetisation, cash continues to play a key role in economic transactions. The loopholes in the digital ecosystem continue to plague the Digital India dream. Many people had warned that replacing the Rs.1000 note with a bigger value note of Rs.2000 would only make it easier to hoard currency. But the government paid no heed.

Five years down the line, the Minister of State for Finance was forced to admit in the Lok Sabha that there was indeed hoarding of the Rs.2000 denomination note and therefore the government was planning on phasing it out. If the Rs.2000 note has to be phased out, there must be some circular or order passed by the government, says Roy. It cannot once again be a unilateral decision announced suddenly, as was the case with demonetisation. Big bang unilateral announcements have become a regular feature of the regime. Demonetisation, the Goods and Services Tax and the suddenly announced COVID lockdown were all actions of a government that refuses to consult its public on decisions that have far-reaching effects on the lives of millions of Indians.