Printing of Rs 100 Notes Stalled as Focus on Rs 2,000 and Rs 500
The Reserve Bank of India’s preoccupation with printing the new Rs 2,000 and Rs 500 notes has almost completely stopped the printing of Rs 100 notes – at this point in time, the most sought after currency – leaving the country staring at a potentially huge financial and economic crisis.
Highly placed RBI sources revealed to The Quint that while the central bank’s printing presses in Salboni (in West Midnapore, Bengal) and Mysore are each printing 20 million new Rs 2,000 notes per day, the Nashik (Maharashtra) and Dewas (Madhya Pradesh) mints, which are run by the Security Printing and Minting Corporation of India Ltd, are printing the new Rs 500 notes. But the production rate of the new Rs 500 notes is “far, far less” than the Rs 2,000 notes, sources disclosed.
This is because the printing of the new Rs 500 notes began at least a month after the first Rs 2,000 notes began to be printed at the Salboni and Mysore presses in October, the sources said. The Bharatiya Reserve Bank Note Mudran Ltd (BRBNML), a wholly owned RBI subsidiary, operates the Salboni and Mysore printing presses.
Potentially Alarming Situation
What is more alarming, however, is that Rs 100 currency notes, which are in very high demand across the country, “are not being printed” at any of the four presses “since the entire attention” is on churning out the new Rs 2,000 and Rs 500 notes. The government has said that the situation will stabilise in 50 days, although economists are not so optimistic, with Saumitra Chaudhari claiming that it could take till at least May 2017, if not beyond this time, before the currency shortage is overcome.
RBI sources said that the printing presses in Salboni and Mysore received the samples for Rs 2,000 notes in August. Approval for printing was granted in September and it was only in October that printing took off in earnest at Salboni and Mysore, which takes care of about 65 percent of the total printing of currency notes.
After negotiations between BRBNL authorities and the labour unions, it was decided to operate three instead of two shifts to “meet the emergency requirements”.
Sources said that was it to maintain total secrecy, employees at the printing presses were only told that a new series of notes would be printed. New series of high value notes are printed every 10 years.
Slow Rate of Printing
The Nashik and Dewas presses, operated by the SPMCIL under the finance ministry, print between 32-35 percent of notes. “The Nashik and Dewas presses print at a lower rate,” sources said.
“There will hopefully be no crisis in the supply of Rs 2,000 notes, but the rate of printing of the new Rs 500 notes is lesser. Consequently, this will hit supply. The potential economic and financial the country is staring at is mind-numbing,” the sources said.
Highly placed RBI sources revealed to The Quint that before the Modi government’s fiat to withdraw Rs 1,000 and Rs 500 notes, the total number of these currency notes in circulation was 2,204 crore (1,578 Rs 500 and 633 Rs 1,000 notes) pieces. This number rose to 2,327 pieces (1,658 of Rs 500 and 668 of Rs 1,000 notes) by October 2016 when there was an increase in the total volume of production of these two currency denominations.
‘Future Economic Contraction’
There have been reports since the government surprisingly withdrew the Rs 500 and Rs 1,000 notes, citing the aim of eradicating black money and hitting terrorism, that there would be an “inevitable short-term economic contraction”. The situation is compounded by the potentially severe shortage of Rs 100 notes for which “there is now an additional requirement”, sources pointed out.
They said that it “is surprising that Rs 2,000 notes are being printed at much larger volume compared to the Rs 500 notes, when the former suits businesses while the latter is more commonly used by the public at large.”
Meanwhile, The Quint has learnt that more than 40,000 ATMs have become non-functional in many parts of the country after an American company, ACI Worldwide, recently cancelled the software licence of Financial Software and Systems Ltd (FSSL), which runs the software programmes of these ATMs that service at least 30 leading banks.
When contacted, ACI Worldwide executives in India did not deny that their company had cancelled the licence that FSSL that helped FSSL operate the ATMs. Responding to The Quint’s questionnaire, ACI Worldwide’s South Asia General Manager Shekhar Ganapathy said in an email that “ACI stands behind the legal notice issued in August 2016 to FSS on account of certain contractual disputes which arose out of an existing agreement. The public notice issued by ACI last week reflects the same stance.”
While Ganapathy said he had “no idea” how many ATMs have been hit, he added that “ ACI’s public notice to an ex-distributor in India has absolutely no connection with the recent ATM issues throughout the country,” although “following the RBI’s announcement last week, there has been a widely reported shortage of cash in ATMs in India.”
When contacted, an FSSL source said that ACI Worldwide’s action amounted to “creating panic” and have “chosen this moment to rake up the matter and are looking at another partner”.
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