RBI Withdraws Rs 2,000 Notes From Circulation: All You Need To Know
The Reserve Bank of India (RBI) has decided to withdraw Rs 2,000 currency notes from circulation, however, notes will continue to be legal tender till 30 September, according to the RBI’s statement released on Friday.
Why RBI decided to withdraw maximum currency notes now?
About 89 per cent of the Rs 2,000 denomination banknotes were issued before March 2017 and are at the end of their estimated life span of 4-5 years. The total value of these banknotes in circulation has declined from Rs 6.73 lakh crore at its peak as on 31 March 2018 (37.3 per cent of total notes in circulation) to Rs 3.62 lakh crore constituting only 10.8 per cent on 31 March 2023.
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.
More importantly, under the “Clean Note Policy” of the RBI, it has been decided to withdraw the Rs 2,000 denomination banknotes from circulation which have been old and soiled.
What if you have banknotes of Rs 2,000?
RBI has decided to withdraw notes of Rs 2,000 with immediate effect but it will continue to be legal tender till 30 September. Before this date, you may deposit Rs 2,000 banknotes into your bank accounts or exchange them for banknotes of other denominations at any bank branch in the usual manner, without restrictions and instructions.
How and where to exchange banknotes?
To ensure regular activities of bank branches, the exchange of Rs 2,000 banknotes into banknotes of other denominations kept at a limit of Rs 20,000 at a time at any bank from 23 May 2023.
The exchange facility also will be provided at the 19 Regional Offices (ROs) of RBI having Issue Departments from the same date.
Why Rs 2,000 banknotes were introduced in the first instance?
The Rs 2,000 denomination banknote was introduced in November 2016 under Section 24(1) of the RBI Act, 1934, primarily to meet the currency requirement expeditiously after the demonetisation which ended the legal tender tag of all Rs 500 and Rs 1,000 banknotes in circulation.
According to the RBI, the objective of introducing Rs 2,000 banknotes was met once banknotes in other denominations became available in adequate quantities. Therefore, the printing of Rs 2,000 banknotes was also stopped in 2018-19.
On the development, Senior Vice President at Icra, Karthik Srinivasan said that the deposit accretion of banks could improve marginally in the near term and this will also ease the pressure on deposit rate hikes and could result in a moderation in short-term interest rates.
Whereas, Director of Resurgent India, Sudhir Chandi doesn’t see it as demonetisation or anything similar that happened in 2016. He believes that the action of RBI seems to be more from the clean note policy angle since most of the notes had become old and soiled after initial printing way back in 2016. A large number of these notes have now become not fit for usage and circulation, in the absence of fresh printing of such notes in the last 2-3 years by RBI, Chandi added.
He also said that the step of withdrawal of such notes will be fruitful in curbing fake currency notes.