RBI to withdraw Rs 2,000 notes from circulation

Currency value down 50% in 5 years

Tribune News Service

New Delhi, May 19

The Rs 2,000 currency note, introduced after demonetisation in 2016, will be withdrawn from circulation from September 30, said an RBI statement.

RBI cites reasons

1. Introduced after DeMo in 2016, RBI says objective achieved as notes in other denominations now adequately available
2. As 89% of the Rs 2,000 notes issued before March 2017, these are at the end of estimated four to five-year lifespan
3. Notes no longer commonly used for transactions — usage declines from 37.3% in 2018 to 10.8% in March 2023

People holding the notes can deposit or exchange these up to a limit of Rs 20,000 at any bank branch beginning May 23. The RBI has asked banks to stop issuing the Rs 2,000 denomination notes with immediate effect.

A statement from the RBI gave several reasons for the move. The first was that the objective of introducing Rs 2,000 banknotes was met once notes in other denominations became available in adequate number. It claimed that these notes were “primarily” introduced after demonetisation to meet the currency requirement after the withdrawal of legal tender status of all Rs 500 and Rs 1,000 banknotes in circulation then. Therefore, the printing of Rs 2,000 banknotes was stopped in 2018-19.

Clean note policy

• The move comes amid concerns of the Rs 2,000 notes being used to hoard black money
• The RBI had stopped printing Rs 2,000 notes in 2018-19 and the notes were rarely in circulation; cites its ‘Clean Note Policy’ to phase out the notes

Secondly, about 89 per cent of the Rs 2,000 banknotes were issued before March 2017 and were at the end of their estimated life-span of four-five years, it said. Their withdrawal, therefore, is warranted under the RBI’s “Clean Note Policy”. Thirdly, the RBI observed that this denomination of notes were not commonly used for transaction.

The total value of these banknotes in circulation has declined from 37.3 per cent of notes in circulation in 2018 to 10.8 per cent as on March 31, 2023. “It may be noted that the RBI had undertaken a similar withdrawal of notes from circulation in 2013-14. Accordingly, the public may deposit Rs 2,000 banknotes in their bank accounts or exchange these into banknotes of other denomination at any bank branch. Deposit into bank accounts can be made in the usual manner without restrictions and subject to extant instructions and other applicable statutory provisions,” said the RBI in its statement.

Rs 6.73 lakh cr Worth Rs 2K notes on Mar 31, 2018 (37.3% of all notes in circulation)

Rs 3.62 lakh cr Worth of notes on Mar 31, 2023 (10.8% of all notes in market)

Meanwhile, the Opposition parties attacked the BJP government. “Typical of our self-styled Vishwaguru. First Act, Second Think (FAST). 2000 rupee notes introduced with such fanfare after that singularly disastrous 'Tughlaqi firman' of Nov 8 2016 are now being withdrawn (sic)," tweeted Congress general secretary Jairam Ramesh, targeting PM Narendra Modi.

Congress spokesperson Pawan Khera said the "ghost" of November 8, 2016, had come back to haunt the nation once again. “...the PM sermonised the nation on the benefits of the new Rs 2,000 notes. Today, when the printing is stopped, what happened to all those promises?”' said Khera.

Rs 20,000 exchange rider

The RBI has allowed the maximum deposit or exchange of Rs 20,000 worth of Rs 2,000 notes at a time

The CPM, NCP and other parties also criticised the government over the withdrawal. Countering the Opposition's criticism, the BJP dubbed them as "fear mongers". "What does a desperate and issueless Opposition do when the RBI takes a decision to withdraw Rs 2,000 note, of which there (withdrawing and introducing currency notes) are several precedence in the past?" tweeted BJP's IT cell chief Amit Malviya.

Join Whatsapp Channel of The Tribune for latest updates.

#demonetisation #Reserve Bank of India RBI