RBI-Introduction of Rs 200 notes will facilitate ease of transactions and provide the missing link

RBI-Introduction of Rs 200 notes will facilitate ease of transactions and provide the missing link between Rs. 100 and 500 bank note.

Today the RBI has announced the release of new Rs. 200 bank note. As per the RBI, the new bank note of Rs 200/- would facilitate exchange, particularly for the common man who deals with denominations at the lower end.

This statement would certainly relate to demonetisation of Rs 500 and Rs 1000 bank notes on the assumption that only rich people deals in Rs. 500 and Rs. 2000 bank notes. In fact this excuse was usedby the Government as a defence mechanism in denying the problem faced by the common man due to the demonetisation.

Should this mean that, Demonetisation Part-II is on the anvil?. Only the time will tell the answer to this question but this would certainly add fuel to the speculations that have already been doing the rounds.

The Statement of RBI issued today is as under:

Reserve Bank of India

Date : Aug 24, 2017

Reserve Bank says introduction of Rs 200 notes will facilitate ease of transactions

Introduction of a new currency denomination and design is done keeping in consideration various factors like ease of transactions for the common man, replacement of soiled banknotes, inflation and the need for combating counterfeiting.

Providing the Missing Link

The optimal system of denominations of currency (coins and notes) is one that would minimize the number of denominations and concurrently increase the probability of proffering exact change. So, what should be the optimal mix of currency denominations? Many countries have opted to use a near variation of the Renard Series, i.e., 1:2 or 1:2.5 ratio between adjacent denominations of currency, which means that the denomination should be twice or two and half times of its preceding denomination. Such a ratio allows exchange of value ordinarily in a maximum of three denominations. In India, we have currency denominations of Rs 1, 2, 5, 10, 20, 50, 100, 500 and 2000. As such, in the lower end of the denomination series, Rs. 200 is the missing one.

Ease of Facilitating Exchange

To achieve the optimal system of currency that would minimize the number of denominations while increasing the probability of proffering exact change, especially at the lower end of denominations, there is a logical need to introduce the missing denomination of Rs 200, which will make the present currency system more efficient. Provision of the new denomination, therefore, would facilitate exchange, particularly for the common man who deals with denominations at the lower end.

Jose J. Kattoor
Chief General Manager

Press Release: 2017-2018/528