Why RBI Not Printed Unlimited Note..??

Why RBI Not Printed Unlimited Note..??

Why RBI Not Printed Unlimited Note..??

There is common doubt in everyone’s mind that why can’t a government print cash and distribute to its voters. to induce this clear

Let’s ask AN example:-

Suppose there area unit solely 2 individuals residing {in a|during a|in AN exceedingly|in a very} country say XYZ with an financial gain of Rs ten every year and also the solely sensible made within the economy is rice.

For example, the whole product and services made within the country is two metric weight unit of rice. currently to shop for one metric weight unit of rice, one has got to pay Rs.10 per Kg.

Imagine all of a unexpected government starts printing moremoney, and also the financial gain risesfrom Rs.10 to Rs.20but the availability of rice remains constant as two metric weight unit. with extra cash in hand, the demandfor rice has gone up, and also the worth of one metric weight unit of ricehas hyperbolic from Rs.10 to Rs twenty.

In each eventualities, the number made hasn’t modified, (2 metric weight unit of rice) however the value has been modified sharply (from Rs.10 to Rs.20) thanks to excess cash printing. therefore printing of cash must always match the whole production of products and services within the country alternatively inflation will destroy the economy.

Major factors to be thought of whereas printing new currency: -Inflation: -

Inflation is that the rise inside the prices of product and services over time. It's AN economic science term which means you have got to pay a lot of to shop for a gallon of milk, fill your gasoline tank or get a haircut. Inflation will increase your value of living. Inflation reduces the shopping for power of each unit of currency.

Almost a number of years back, three eggs might have value you one hundred billion bucks “Zimbabwe” bank note. therefore essentially we tend to area unit talking a few total devaluation of the currency. Of course, this can be extreme, however it shows the aptitude of inflation beast.

Gross Domestic Product: -

GDP is that the ultimate value of the product and services created at intervals the geographic boundaries of a country throughout a nominative quantity, commonly a year. GDP rate may be a vital indicator of the economic performance of a country.


GDP is another necessary issue that affects the number of cash to be written within the economy. the govt prints money of constant value, because the price it's gained into their economy or in a very straightforward approach GDP. So,rising economic productivity - GDP will increase the worth of cash in circulation since every unit of currency will after be listed for a lot of valuable product and services.


The point worth noting is, the govt provides individuals constant quantity of physical currency as a medium of exchange because the price it's going in come back from GDP and inflation.

Minimum Reserve System: -

Currency issued within the country is dependent upon the reserves, run batted in has with it once meeting all its liabilities.


Now by reserves, it means that the following:


1. Bullion reserves

2. interchange reserves

3. Balance of Payment(BOP) solely assets.


In India, currencies area unit equipped by the run batted in with the backing of bullionreserves, interchange reserves (foreign currencies) and Balance of payment(only receivables). For the new issue of currencies, the run batted in follows Minimum Reserve System at the present. The (MRS) Minimum Reserve System is followed since 1956.

Under MRS, the run batted in has got to keep a minimum reserve of Rs two hundred large integer comprising of gold bullion and gold coin and foreign currencies.

Out of the whole Rs two hundred crores, Rs115 large integer ought to be within the style of gold bullion or gold coins. the aim of shifting to MRS was to expand the cash provide to satisfy the requirements of skyrocketing transactions within the economy.RBI follows some principle or rule for supply new currencies based totally upon process and dealings wishes of the people.

Solid and Mutilated note: -

Soiled note suggests that a note that, has become dirty thanks to usage and additionally includes a two-piece note affixed along whereby each the items bestowed belong to constant note and kind the whole note.

Mutilated FRS note may well be a FRS note, of that some is missing or that consists of quite 2 items.


Soiled and mutilated banknotes that are not appropriate circulation, area unit withdrawn from circulation once punctually accounting for them within the records of the run batted in. These area unit then burnt within the incinerators provided at the regional offices of the run batted in below strict vigilance and supervising of the run batted in officers. 

The accounting of those banknotes makes it attainable for the run batted in to figure out the printing of the new banknotes so as to interchange the burnt currency notes.


After obtaining checked with Inflation, GDP, and clearance of recent notes, the problem department, ANd management department of run batted in can escort an estimate of currency needed and place the demand sheet ahead of the central government for approval.

Coordination of run batted in with GOI: -

RBI discusses with the govt of India with regard to the denomination, coming up with and safety features of the bank notes to be written within the country and circulated.


The minting of Re.1 currency coins (formerly Re.1 currency notes) and different coins fall inside the jurisdiction of the GOI. once obtaining approval, it'll follow up the method of printing and minting.

Methodology to judge the necessity for currency:-

· The projected gross domestic product figure is out there from Govt, CMIE, and RBIs own analysis Wing (D). (it considers the factors like Inflation and Gdp)

· we tend to all understand the cash with run batted in and Banks -under Note stock account (N).

· Then there's replacement demand thanks to the destruction of flyblown notes (R).

Total Notes to be written = D-N +R

In India, a five-hitter additional are else to satisfy the emergency. this can be counter checked from estimates of Regional Offices and Banks and consolidated and checked DCM main office, RBI Mumbai


Then denomination wise slice is taken for printing and print order is given to printing presses and written in four quarters and remittances plannedaccordingly, and additionally the whole. BazarTak


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