Reserve Bank of India (RBI) has recently announced its decision to withdraw the Rs 2,000 denomination banknotes from circulation, although these notes will remain legal tender, as stated in a circular released on Friday. The central bank has instructed all banks to cease issuing the Rs 2,000 banknotes with immediate effect. The circular emphasized that individuals must exchange all existing Rs 2,000 currency notes before September 30, 2023.
To ensure a timely completion of this exercise and to provide sufficient time for the general public, the RBI has mandated that all banks offer deposit and/or exchange facilities for Rs 2,000 banknotes until September 30, 2023, as stated in the circular. It is important to note that the Rs 2,000 notes will remain legal tender.
In a move to streamline operations and minimize disruptions to regular banking activities, the central bank has announced that individuals can exchange Rs 2,000 notes for other denominations up to a limit of Rs 20,000 at any branch, starting from May 23.
In November 2016, the Reserve Bank of India introduced the Rs 2,000 denomination currency note as a part of the demonetization process that involved discontinuing the Rs 1,000 and old Rs 500 banknotes. The RBI states that they achieved the objective of introducing the Rs 2,000 banknotes once they had an adequate quantity of currency in other denominations available. As a result, the printing of Rs 2,000 banknotes ceased in 2018-19.
In its clarification, the RBI stated that approximately 89% of the Rs 2,000 denomination banknotes, which were issued before March 2017, are nearing the end of their estimated lifespan of 4-5 years. The total value of these banknotes in circulation has declined from Rs 6.73 lakh crore at its peak on March 31, 2018 (37.3% of Notes in Circulation) to Rs 3.62 lakh crore, constituting only 10.8% of Notes in Circulation as of March 31, 2023.
Furthermore, it has come to attention that the public rarely uses the Rs 2,000 denomination for transactions. Moreover, there is an ample supply of banknotes in various other denominations to adequately fulfill the currency needs of the general public.
The circular states that the Reserve Bank of India has decided to withdraw the Rs 2,000 denomination banknotes from circulation, in accordance with the “Clean Note Policy” of the central bank. This decision means that banks will no longer issue Rs 2,000 banknotes. However, citizens can rest assured as the withdrawal process will systematically and promptly carry out within a specified timeframe.
In a press release, the central bank assured that the Rs 2,000 notes currently in circulation will retain their legal tender status, allowing people to continue using them for transactions and accepting them as payment. It is worth noting that the RBI has strongly encouraged the public to deposit and/or exchange these banknotes on or before September 30, 2023.
Therefore, the decision to withdraw Rs 2,000 banknotes will not have an immediate impact on citizens, as they will have ample time to exchange them for other denominations.