There has been a bizarre development within the Reserve Bank of India (RBI). The central bank has reportedly decided to cut its order for printing currency notes in the current financial year due to a shortage of space in the currency vaults.
The RBI's order for printing currency notes for fiscal 2018 stands at 21 billion pieces. It was 28 billion pieces last year. This year's order is even less than past five years average of 25 billion pieces, Mint reported.
"There is very little space in currency chests and RBI vaults to keep the new notes even after 50-60 percent of the demonetised notes have been transferred from the chests to RBI," a senior executive with a private sector bank told Mint.
After the government decided to withdraw Rs 500 and Rs 1,000 notes as legal tender last year, the RBI had remonetised around 90 percent of the currency in the system. As of October 13, currency in circulation stood at Rs 15.3 lakh crore, according to the RBI.
According to reports, the pile-up of old Rs 500 and Rs 1,000 notes that were returned after demonetisation has blocked most of the space in RBI vaults and currency chests. Old notes can't be scrapped as they are still being counted.
Earlier in October, the RBI had said that it is in the process of checking the demonetised banknotes using a sophisticated currency verification system. These machines are way superior to the note counting machines. To increase the processing capacity, the RBI is using the available machines in two shifts.
"Reduction in indent (government jargon for order) is a conscious effort by RBI to keep within reasonable limits and optimising it with production capabilities," Soumya Kanti Ghosh, group chief economic adviser at State Bank of India, told Mint.