Business

New notes to cost RBI more than Rs. 12,000 crore

By removing the Rs. 1,000 note, the government is doing away with the cheapest note to print in relation to the face value of the note.

Replacing all the Rs. 500 and Rs. 1,000 denomination notes with other denominations, as ordered by the government, could cost the Reserve Bank of India at least Rs. 12,000 crore, based on the number of notes in circulation and the cost incurred in printing them.

Data from a Right to Information answer by the RBI in 2012 shows that it costs Rs. 2.50 to print each Rs. 500 denomination note, and Rs. 3.17 to print a Rs. 1,000 note.

That means that it cost the central bank Rs. 3,917 crore to print the 1,567 crore Rs. 500 notes in circulation, and Rs. 2,000 crore to print the 632 crore Rs. 1,000 notes in circulation currently.

Assuming that the new Rs. 500 notes cost the same to print, then that is an additional Rs. 3,917 crore spent in simply maintaining the same number of notes in circulation.

The new Rs. 2,000 notes are likely to cost about the same or a little more than the Rs. 1,000 notes, which means an additional cost of Rs. 2,000 crore to print them.

In total, removing the old notes and replacing them with the new Rs. 500 and Rs. 2,000 notes will cost the central bank a total of at least Rs. 12,000 crore. This figure is likely to go up since additional security measures, which the new notes are set to have, will only add to the cost of printing.

By removing the Rs. 1,000 note, the government is doing away with the cheapest note to print in relation to the face value of the note.

Highest cost

The Rs. 3.17 it costs to print a Rs. 1,000 note is the highest in absolute terms across denominations, but it is the lowest when compared to the face value of the note.

For example, a Rs. 10 note costs only Rs. 0.48 to print, but that works out to 9.6 per cent of the face value of the note. Printing a Rs. 10 note costs 10 per cent of what that note is worth. This, for a Rs. 1,000 note, is 0.3 per cent.

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Printable version | Jul 30, 2020 6:34:19 AM | https://www.thehindu.com/business/New-notes-to-cost-RBI-more-than-Rs.-12000-crore/article16440301.ece

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