Rs 2000 was transitory note to fill in value lost due to demonetization
- July 3, 2023
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Rs 2000 was transitory note to fill in value lost due to demonetization
Subject : Economy
Section: Monetary policy
In news: “It was a transitory kind of note to fill in the value which was lost in demonetisation”, says former MD of Bharatiya Reserve Bank Note Mudran Private Ltd.
Key Points:
- It was said that after demonetisation, done by banning Rs 500 and Rs 1,000 notes, there was a sudden currency withdrawal, and to fill that gap in a timely manner the Rs. 2,000 notes were issued.
- It may be noted that RBI issued a whole new series of notes of the denomination of Rs 500 and Rs 2,000, and new notes for Rs 10, 20, 50, 100 and Rs 200.
- Case for high denomination notes:
- As economy grows and inflation rises then automatically the relative value of the current highest denomination comes down. The country then requires higher denomination, otherwise we would not be able to handle normal day-to-day payment transactions.
- It is also said that normally the highest denomination is meant for store of value and not for medium of exchange.
- Both the arguments though prove weak, when financial institutions and tools are as developed as today.
- Problem with high denomination notes:
- the anonymity of currency makes it an attractive means of payment in illegal transactions and a desirable store of value for criminals.
- It facilitates tax evasion, avoiding capital controls, money laundering, funding of criminal activity and of terrorism.
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