Reserve bank of India determines the volume of currency taking in consideration the quantum of products and services being transacted. Also the old currency canceled is to be replaced by new currency.
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The Reserve Bank of India decides upon the volume and value of bank notes to be printed every year. The quantum of bank notes that needs to be printed broadly depends on the annual increase in bank notes required for circulation purpose, replacement of soiled notes and reserve requirement. The RBI estimates the demand for bank notes on the basis of the growth rate of the economy, the replacement demand and reserve requirements by using statistical models.
