RBI Withdraws Rs 2,000 Notes from Circulation, Sets Sept 30 Deadline for Exchange or Deposit
- ByStartupStory | May 20, 2023
The Reserve Bank of India (RBI) made an announcement on Friday stating that it will be discontinuing the circulation of the highest denomination currency note, Rs 2,000, while clarifying that the notes will still be considered legal tender. According to the RBI, individuals can deposit or exchange their existing Rs 2,000 notes at banks until September 30, with a maximum limit of “Rs 20,000 at one instance.”
The central bank issued an advisory urging the public to deposit or exchange the Rs 2,000 notes, which were introduced during the demonetization in November 2016 when Rs 500 and Rs 1,000 notes were withdrawn. The advisory recommended individuals to utilize their bank accounts or visit any bank branch to convert these notes into other denominations. Furthermore, the advisory instructed banks to cease the issuance of Rs 2,000 notes immediately.
“In order to ensure operational convenience and to avoid disruption of regular activities of bank branches, exchange of Rs 2,000 banknotes can be made up to a limit of Rs 20,000 at a time, at any bank starting from May 23,” it said.
“To complete the exercise in a time-bound manner and to provide adequate time to the members of public, all banks shall provide deposit and/ or exchange facility for Rs 2,000 banknotes until September 30, 2023,” it said.
“Deposit into bank accounts can be made in the usual manner, that is, without restrictions and subject to extant instructions and other applicable statutory provisions,” the RBI said.
Starting from May 23, the 19 regional offices of the RBI with issue departments will provide the option for exchanging Rs 2,000 notes up to a limit of Rs 20,000 at a time.
An hour after the announcement, report says Indian Express, a top official in the Reserve Bank of India said: “This is a routine exercise and a similar withdrawal of currency notes which had been printed before 2005 was done by the Government in 2013-2014. So nothing more should be read into this move this time around too. This is what other countries, including the United States do from time to time.”
According to an RBI official, there are several reasons behind the decision. Firstly, the RBI had a significant number of soiled Rs 2,000 notes that needed to be addressed. Additionally, these notes were not widely popular and were largely inactive. They have already reached the end of their life cycle. Even during their peak circulation, they constituted only a small portion of the total currency in circulation, currently accounting for only 10%-11%. In contrast, during the demonetization of Rs 500 and Rs 1,000 notes in 2016, those denominations constituted 80% of the total currency in circulation, highlighting a significant difference.
“The objective of introducing Rs 2,000 banknotes was met once banknotes in other denominations became available in adequate quantities. Therefore, printing of Rs 2,000 banknotes was stopped in 2018-19,” the RBI said, adding that “it has also been observed that this denomination is not commonly used for transactions” and “the stock of banknotes in other denominations continues to be adequate to meet the currency requirement of the public”.
As per the RBI, approximately 89% of the Rs 2,000 denomination notes were issued before March 2017 and have reached the end of their estimated life span of four to five years. The RBI stated that the total value of these notes in circulation has significantly decreased from its peak of Rs 6.73 lakh crore, which accounted for 37.3% of the notes in circulation as of March 31, 2018, to Rs 3.62 lakh crore, constituting only 10.8% of the notes in circulation as of March 31, 2023.
The Rs 2,000 note was introduced in November 2016 under Section 24(1) of the RBI Act, 1934, with the main objective of quickly fulfilling the currency demands of the economy following the withdrawal of legal tender status for all Rs 500 and Rs 1,000 notes that were in circulation at that time.
Follow Startup Story
Related Posts
