IDFC First Bank CEO Vaidyanathan V Supports Lowering Highest Denomination Currency In India
In a recent LinkedIn post, Vaidyanathan V, the Managing Director and CEO of IDFC First Bank, expressed his views on the highest denomination currency in India, suggesting that Rs 500 is more than sufficient for the country. As being a veteran in the banking sector, he shared some points to explain his stance.
According to international benchmarks, he highlighted that the highest denomination currency as a percentage of per capita GDP is significantly lower in developed countries. For instance, in the United States, where the per capita GDP is $68,000, the highest denomination is $100, representing only 0.15 per cent of per capita income.
Similarly, in the UK, the highest denomination is £50, accounting for 0.11 per cent of per capita GDP with an income of £46,000. Comparatively, the highest denomination in India, Rs 500, amounts to 0.25 per cent of the country's per capita GDP, which Vaidyanathan considers more than adequate.
Drawing attention to India's leadership in digital payments, Vaidyanathan emphasised the country's extensive usage of platforms such as UPI (Unified Payments Interface), processing $1 trillion in transactions annually, which is approximately one-third of India's GDP. He also highlighted the availability of various digital payment options like RTGS, IMPS, NACH, AePS, NETC, debit cards, credit cards, NEFT, PPI, BBPS, and more. Considering the advanced level of digitization, Vaidyanathan suggested that India could have an even lower highest-value denomination compared to international standards.
Vaidyanathan further argued that withdrawing the high-value denomination of Rs. 2000 would help curtail the parallel economy in the country. As more people are compelled to engage in formal channels for transactions related to property, gold, and other assets, the parallel economy could see a significant decline. Additionally, lowering the highest denomination would also reduce the risks associated with counterfeiting, as counterfeiters often target high-value denominations due to the potentially high returns.
Regarding the introduction of the Rs 2000 note as a temporary measure to address liquidity concerns during the withdrawal of Rs 500 and Rs 1000 notes, Vaidyanathan stated that the purpose has served its time. He assured that there would be no inconvenience in replacing the Rs 2000 notes since Rs 500 notes are abundantly available, making the swap process easy for the public.
The banking expert expressed his support for reducing the highest denomination currency in India, asserting that Rs. 500 is more than sufficient for the country's requirements.
