RBI Governor Shaktikanta Das dismissed rumors and speculation surrounding the reintroduction of Rs 1,000 notes, stating that there was no such proposal at present. The uncertainty arose following the recent surprise decision to withdraw Rs 2,000 notes from circulation. Responding to inquiries about the potential return of the discontinued currency, the RBI Governor affirmed that it was purely speculative.
Last Friday, the Reserve Bank of India (RBI) declared its intention to withdraw the Rs 2,000 denomination banknotes, which were the highest value notes in circulation. This development sparked discussions suggesting that the central bank might reintroduce the Rs 1,000 notes, which had been demonetized alongside the Rs 500 notes in November 2016. Soon after the RBI’s withdrawal announcement, former Finance Minister P Chidambaram commented that he would not be surprised if the government or RBI reintroduced the Rs 1,000 notes.
The RBI clarified that the introduction of the Rs 2,000 notes in the past had primarily served to meet the currency needs of the economy swiftly after the withdrawal of Rs 500 and Rs 1,000 notes. Once an adequate quantity of banknotes in other denominations became available, the purpose of introducing the Rs 2,000 notes had been fulfilled. Consequently, the printing of Rs 2,000 banknotes ceased in 2018-19.
According to the central bank, approximately 89% of the Rs 2,000 notes had been issued before March 2017 and were nearing the end of their estimated lifespan of 4-5 years. The total value of these notes in circulation had declined from Rs 6.73 lakh crore at its peak on March 31, 2018 (constituting 37.3% of the currency in circulation) to Rs 3.62 lakh crore, accounting for only 10.8% of the notes as of March 31, 2023.
While the RBI has withdrawn the Rs 2,000 notes, it assured the public that they would remain legal tender. Nevertheless, it encouraged individuals to deposit or exchange the currency before September 30. Today, the RBI Governor expressed confidence that most of the Rs 2,000 notes would be returned by the specified deadline. Speaking publicly for the first time since the surprising decision, Governor Das emphasized that the move was part of currency management. He further assured that the impact of the withdrawal on the economy would be minimal, as the Rs 2,000 notes constituted only 10.8% of the total currency in circulation.
Regarding the withdrawn Rs 2,000 notes, the RBI Governor stated that individuals could either deposit them in bank accounts or exchange them for other currency. Banks were advised to make the necessary arrangements for the exchange process. Governor Das reiterated, “We expect most of the Rs 2,000 banknotes to come back to the exchequer by September 30.”
To address concerns about large deposits, the existing income tax requirement of furnishing PAN for deposits of Rs 50,000 or more in bank accounts would continue to apply to deposits of the withdrawn Rs 2,000 notes, as clarified by the Governor.