Yes, it is the Reserve Bank of India that issues banknotes needed for the country. But have you ever wondered on what basis they issue the currency notes? Most certainly, on a demand-basis.
The value and amount of banknotes to be printed are decided by the RBI. Based on the demand for a particular currency, it is issued and circulated.
Let us take an example from the present day situation. People are in great need for currency notes in larger denominations like 500. To make up this need, the RBI note issuing unit in Mysuru stopped printing all other banknotes, and began to produce the new series of Rs 500 exclusively. This is what is meant by demand-based production.
The bank also issues currency depending on the number of soiled notes that are returned to it.
The new banknotes are distributed through various RBI offices located in Ahmadabad, Belapur, Bhubaneshwar, Kolkata, Bangalore, Chandigarh, Hyderabad, Guwahati, Chennai, Lucknow, Kanpur, Bhopal, Patna, Jaipur, New Delhi, Nagpur, Jammu, Kochi, Thiruvananthapuram and Mumbai.
These offices receive and ensure the circulation of fresh banknotes issued by the central bank.