RBI likely to introduce Rs 200 notes from September

The broader objective of the introduction of Rs 200 notes is to eliminate counterfeit currency notes and eradicate black money from the system.

rbi head office reserve bank of india notes currency denomination 2000 1000 500 100 mysuru — A security guard stands in the lobby of the Reserve Bank of India (RBI) headquarters in Mumbai July 30, 2013.Reuters file

The Reserve Bank of India is all set to introduce Rs 200 denominated bank notes for the first time in history. According to reports, about 50 crore notes of the new denomination will be introduced by the first week of September.

The broader objective of the introduction of the Rs 200 notes is to eliminate counterfeit currency notes and eradicate black money from the system.

"If the proportion of higher denomination notes is large in the total currency in the circulation, it incentivises hoarding and generation of unaccounted money," group chief economist at SBI, Soumya Kanti Ghosh, told The Economics Times.

Ghosh believes that with the introduction of Rs 200 notes, the economy will be benefited at different levels -- the share of lower denomination notes will be greater in currency circulation and it would also facilitate cash usages from a transaction motive perspective.

After Prime Minister Narendra Modi's demonetisation move in November 2016, the share of higher denomination notes -- Rs 500 and Rs 2,000 -- has come down to about 70 percent of overall currency in circulations, which previously stood at 86 percent.