'Shortage of Sinsaimdang'... Bank of Korea to Increase 50,000 Won Bill Order Volume to Record High

Order Volume of 50,000 Won Bills Exceeds 20 Trillion Won This Year, Approaching 25 Trillion Won
"Demand for High-Denomination Bills Increases Due to Prolonged COVID-19... Will Ensure Sufficient Supply"

Last Year's 50,000 Won Bill Recovery Rate at 24%, Lowest Since 2009
Recovery Rate Also at 7% in January-February This Year

Asia Economy DB

[Asia Economy Reporter Kim Eunbyeol] The Bank of Korea is expected to increase the order volume of 50,000 won bills to an all-time high this year. This is because the demand for high-denomination bills has surged significantly as the tendency to hold cash has grown due to the ongoing COVID-19 pandemic since last year. In the case of last year, the demand for 50,000 won bills increased more than expected, leading to a 'shortage phenomenon' of 50,000 won bills in circulation ahead of the Chuseok holiday.

According to the Bank of Korea on the 17th, the usual annual order volume for 50,000 won bills, which was around 10 trillion won, was increased to 16 trillion won last year, and this year it plans to increase it to the largest scale ever. Considering that the demand for 50,000 won bills remains strong recently and that the cash returning to the Bank of Korea has significantly decreased as people avoid visiting face-to-face service industries and refrain from using cash, the order volume for 50,000 won bills this year is expected to exceed 20 trillion won and approach 25 trillion won.

A Bank of Korea official explained, "The currency supplied to the market includes the bills ordered and manufactured by the Korea Minting and Security Printing Corporation as well as the bills previously stored in the Bank of Korea's vaults," adding, "Due to the COVID-19 pandemic, the amount of high-denomination bills returning to the Bank of Korea through self-employed individuals and others has significantly decreased, and the demand for high-denomination bills has surged as self-employed people and small and medium-sized enterprises increasingly keep money in cash as a precaution against uncertainty."

Before COVID-19, when people spent money in lodging and food service industries, self-employed individuals in related sectors often deposited the money they earned in cash into banks. However, recently, as their earnings have significantly decreased, the recovery rate of high-denomination bills has been low. Another reason cited for the increased demand for 50,000 won bills is that under the low-interest-rate environment, people tend to keep funds in high-denomination bills rather than bank deposits. When interest rates are high, people deposit 50,000 won bills in banks expecting interest income, but when interest rates are low, the demand to hold cash increases.

*Source: Bank of Korea

Last year, the Bank of Korea issued 50,000 won bills worth 25.2155 trillion won, while the amount recovered by the Bank of Korea was 6.0998 trillion won, resulting in a recovery rate of about 24.19%. This was the lowest level since the 50,000 won bill was first issued in 2009 (7.3%).

This year, the recovery rate of 50,000 won bills remains low. From January to February this year, the issuance amount of 50,000 won bills was about 5.3945 trillion won, while the amount recovered by the Bank of Korea was only 378.6 billion won, resulting in a recovery rate of just 7.02%. Usually, January and February see a low recovery rate because many people withdraw high-denomination bills to give New Year's money during the Lunar New Year holiday. However, compared to the recovery rate of 43.58% in January-February last year and 55.47% in January-February 2019, this year's recovery rate is significantly lower. The Bank of Korea explained, "Since the Lunar New Year holiday was in February this year, banks had secured 50,000 won bills until February, which is why the recovery rate was particularly low. From March, the amount of 50,000 won bills returning to the Bank of Korea is expected to increase compared to January and February."

Since last year, as 50,000 won bills have disappeared as soon as they are issued, some have suggested the possibility that these bills have flowed into the underground economy. However, the Bank of Korea's position is that this is not the case. The underground economy refers to economic agents keeping money earned in cash to evade taxes, but the tax system has not changed to the extent that money flows into the underground economy.

A Bank of Korea official said, "When self-employed individuals received emergency disaster relief funds related to COVID-19, many did not deposit them into bank accounts but withdrew them immediately in cash to keep as reserves," adding, "Rather, the increased demand for 50,000 won bills reflects the desperate situations of self-employed people and other ordinary citizens." The official also stated, "Major countries such as Japan and Germany show similar patterns, so the decline in the recovery rate of 50,000 won bills cannot be seen as a structural problem caused by inflows into the underground economy. To respond to this demand for high-denomination bills, the order volume has been significantly increased, and we will supply currency without any problems."

This content was produced with the assistance of AI translation services.