JOIN USBanks face challenge with Rs 2,000 note exchange exercise set to begin
The decision by the Reserve Bank of India (RBI) to withdraw Rs 2,000 denominations could pose a challenge for Indian banks, with 181 crore pieces of notes set to be taken out of circulation.
While the exercise is nowhere near as colossal as the demonetisation of 2016, Indian banks nonetheless are expected to deploy additional staff to handle the exchange of Rs 2,000 notes, The Indian Express reported.
India has 1.55 lakh bank branches, and given the volume of Rs 2,000 notes in circulation, each of these branches on an average will have to handle 11,667 notes from May 23 to September 30—an average of 116 notes per day.
Further, the exercise is slated to add to the operating costs of banks.
"There is a cost involved in exchange of notes. Banks will have to shell out money to reconfigure ATMs and cash recyclers accordingly," IE quoted an official of a public sector bank.
Yet, while banks are expected to face pressure to facilitate the exchange of Rs 2,000 notes, there is a flipside to the exercise.
Given the fact that 181 crore Rs 2,000 notes have to be exchanged, there could be a marginal rise in bank deposits across the country.
"As witnessed during demonetisation, we expect the deposit accretion of banks could improve marginally in near term. This will ease the pressure on deposit rates hikes and could also result in moderation in short-term interest rates," Karthink Srinivas, Senior Vice President, Group Head – Financial Sector Ratings, ICRA, was quoted by IE.
Meanwhile, the State Bank of India (SBI), in a bid to smoothen the process of exchange, announced on Sunday that customers would be allowed to deposit a maximum of 10 Rs 2,000 notes (equivalent to Rs 20,000) per transaction, and that these transactions would not require an ID proof or a requisition slip.
However, with the exchange yet to begin, it remains to be seen whether the excercise will be completed seamlessly, without inconveniencing people.