BQ Explains: Are  Rs 2,000 Notes Disappearing From ATMs?
ATMs of public and private sector banks in India (Photograph: Adeel Halim/Bloomberg)

BQ Explains: Are Rs 2,000 Notes Disappearing From ATMs?

Have you visited your ATM lately and come away wondering why you aren’t getting enough Rs 2,000 notes?

Looks like there is a reason for it.

No, there is no reason to believe that the Rs 2,000 note is being withdrawn from circulation. The notes remain in circulation and continues to be legal tender. Some banks, however, are recalibrating ATMs to meet demand for lower denomination notes, which are easier to exchange as part of day-to-day transactions.

Conversations with five executives at firms that manage ATMs and cash supplies, along with two senior bankers, suggest that banks have been recalibrating their ATMs selectively over the last two to three months.

A senior public sector banker, who spoke on the condition of anonymity, said there was no country-wide recalibration of ATMs to reduce disbursals of Rs 2,000 notes. Banks are doing this based on their assessment of cash demand in certain areas. There have been no directions from the government or the Indian Banks’ Association to recalibrate ATMs, this banker said.

Emails sent to the Reserve Bank of India and the IBA on Thursday went unanswered.

So What’s Changed?

According to the executives at cash management firms that BloombergQuint spoke to, banks are changing the mix of currency being dispensed through ATMs.

Each ATM has ‘cassettes’ which hold cash. There are typically four such cassettes.

The recalibration currently underway at some banks and ATMs is aimed at replacing the Rs 2,000 cassette with a cassette holding Rs 500 notes. The other cassettes will stock either the Rs 200 or Rs 100 notes, the executives said.

A spokesperson for AGS Transact Technologies, a provider of payment processing services, told BloombergQuint that banks are identifying ATMs in specific regions and locations as part of the recalibration effort, so as to better manage their cash and ATM operations.

K Srinivas, chief executive officer and managing director at BTI Payments, said banks have been replacing Rs 2,000 notes with smaller denomination notes over the last few years. Currently, less than 10 percent of ATMs operated by BTI Payments dispense the Rs 2,000 currency note, Srinivas said.

Banks have realised that the acceptance of Rs 2,000 notes in the retail market is very low and customers have been complaining about their inability to withdraw lower amounts or lower-denomination currency notes, said one of the five executives quoted above, who spoke on the condition of anonymity.

Another senior cash management executive, who also spoke on the condition of anonymity, put it down to the velocity of circulation of Rs 2,000 notes. The supply of Rs 2,000 notes is now static. In addition, people tend to store or hoard these high denomination notes a bit more. Thus, the circulation of these notes is lower, the executive said.

But its not a one-size-fits-all strategy, explained Rustom Irani, managing director, Hitachi Payment Services.

Hitachi has recalibrated 12-13 percent or 6,000 of its existing ATM network to remove the Rs 2,000 notes over the past few months.

“There are problems where in some ATMs the cash being withdrawn is higher than the total amount of Rs 500, Rs 200 and Rs 100 it can hold. Therefore, banks are recalibrating specific ATMs and deciding on the right configuration of currency notes depending on the demand for notes, the size of withdrawals at specific ATMs and supply from currency chests,” said Irani.

The most common configuration is to place one cassette with Rs 100 notes, one with Rs 200 notes and two with Rs 500 notes, most executives BloombergQuint spoke to said.
BQ Explains: Are  Rs 2,000 Notes Disappearing From ATMs?

Slowdown In Printing Of Rs 2,000 Notes

While there is no evidence to suggest a diktat from the government or the RBI to withdraw the Rs 2,000 note from ATMs, authorities have been trying to reduce the dependence on high-value notes.

Soon after demonetisation in 2016, when Rs 500 and Rs 1,000 notes were withdrawn, the RBI stepped up printing of Rs 2,000 notes to remonetise the economy quickly. As a result, in 2017, 50 percent of the value of India’s currency in circulation was in the form of Rs 2,000 notes.

Since then, the RBI has shifted focus to the lower denomination Rs 500 notes.

According to data from the RBI’s 2018-19 annual report, no new Rs 2,000 notes were printed between 2018 and 2019. In fact, the number and value of such notes came down marginally as soiled notes and fake notes went out of the system. Detection of fake Rs 2,000 notes also spiked by 22 percent between 2018 and 2019, the RBI’s report showed.

Since high-value notes are more a store of value and can often be susceptible to misuse via hoarding and counterfeiting, the RBI has tried to moderate the share of these notes in the economy’s currency supply.

Now, with banks also reducing their circulation via ATMs, you may see less and less of the Rs 2,000 rupee note in your day-to-day life.

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