This is the second new denomination notes which will be issued after the demonetisation exercise. Following the ban of high value notes in November, ₹2000 banknote was introduced in the circulation. Also a new look ₹500 note was also introduced and now a new ₹50 will be also be pumped in. The new notes are smaller in size.
“In exercise of the powers conferred by sub-section (1) of section 24 of the Reserve Bank of India Act, 1934 and on the recommendations of the Central Board of Directors of the Reserve Bank of India, the Central Government hereby specifies the denomination of bank notes of the value of two hundred rupees,” the notification said without specifying the design. The note is likely to be slimmer, on the lines of the ₹2,000 and the new ₹500 note.
Rationale - Renard Series
The main objective of any central bank’s currency management department is to minimise the number of denominations in a transaction and at the same time increase the chance of presenting exact change.
Like many countries, India has adopted something similar to the Renard Series, that is, 1:2 or 1:2.5 ratio between adjacent denomination of currency. In other words, the denomination should be twice or two and half times its preceding denomination.
Improving efficiency
Currency experts said it is a standard practice to have 1 series, 2 series and 5 series note, like ₹1, ₹2, and ₹5 and ₹10, ₹20, and ₹50 - which is in the Renard Series. So there are was a gap, between ₹100 and ₹500.
“It is a natural phenomenon that the gap will be filled,” former RBI deputy governor R Gandhi had told The Hindu in an interview in April when asked why the system needs a Rs 200 denomination banknote.
“For conducting day to day transactions, the idea is that one should be able to complete a transaction with the least number of currency notes. So, the 2 series plays an important role,” Mr Gandhi added.
Experts said the introduction of the ₹200 note will improve the efficiency of the present currency system of the country.
