The Reserve Bank of India (RBI) has recently made an important decision regarding the circulation of Rs 2,000 denomination banknotes. In line with its “Clean Note Policy,” the RBI has announced the withdrawal of the Rs 2,000 notes from circulation. However, it’s important to note that these notes will continue to be legal tender.
In a statement released on Friday, the central bank stated that the withdrawal of the ₹2,000 banknotes is part of an effort to maintain the integrity of the currency. To ensure a smooth transition and provide sufficient time to the public, the RBI has directed all banks to facilitate the deposit and/or exchange of ₹2,000 banknotes until September 30, 2023.
Explaining the rationale behind this move, the RBI highlighted that approximately 89% of the ₹2,000 denomination banknotes were issued prior to March 2017 and have reached the end of their estimated lifespan of 4-5 years. The total value of these banknotes in circulation has also significantly decreased from ₹6.73 lakh crore at its peak on March 31, 2018, to ₹3.62 lakh crore, accounting for only 10.8% of the total currency in circulation as of March 31, 2023. Additionally, it has been observed that the ₹2,000 notes are not commonly used for day-to-day transactions. The RBI assured the public that an adequate stock of banknotes in other denominations is available to meet their currency needs.
To facilitate the withdrawal process, members of the public can deposit their ₹2,000 banknotes into their bank accounts or exchange them for banknotes of other denominations at any bank branch. The deposit process will be carried out as usual, without any restrictions, and in accordance with existing instructions and statutory provisions.
To ensure convenience and avoid disruptions at bank branches, the RBI has set a limit of ₹20,000 for exchanging ₹2,000 banknotes with banknotes of other denominations. This facility will be available at any bank starting from May 23, 2023. Additionally, the RBI’s 19 Regional Offices with issue departments will also provide the facility for exchanging ₹2,000 banknotes up to the limit of ₹20,000 at a time, starting from May 23.
The ₹2,000 denomination banknote was introduced in November 2016 following the demonetization of ₹1,000 and old ₹500 banknotes. The RBI had initially introduced the ₹2,000 notes to bridge the currency gap until an adequate supply of banknotes in other denominations became available. Printing of the ₹2,000 banknotes had already ceased in 2018-19.
According to the Annual Reports of the RBI presented to Parliament by Finance Minister Nirmala Sitharaman in March, the total value of ₹500 and ₹2,000 denomination banknotes in circulation as of end-March 2017 and March-end 2022 was ₹9.512 lakh crore and ₹27.057 lakh crore, respectively.
In response to concerns about ATMs not dispensing ₹2,000 notes, Finance Minister Nirmala Sitharaman clarified that banks make their own assessments of denominational requirements for ATMs based on factors such as past usage, consumer demand, and seasonal trends. Therefore, no specific instructions have been issued to banks regarding the exclusion of ₹2,000 notes from ATMs.
This move by the RBI marks a significant step in the country’s currency management strategy and aims to ensure the smooth functioning of the economy while maintaining the integrity of the Indian rupee.