Following a review, the Reserve Bank of India (RBI) announced on May 19 that it is withdrawing Rs 2,000 notes from circulation. However, banknotes in the value of Rs 2,000 will remain legal tender, according to the RBI.
“In light of the foregoing, and in accordance with the Reserve Bank of India’s ‘Clean Note Policy,’ it has been decided to withdraw the Rs 2,000 denomination banknotes from circulation,” the RBI said.
The Reserve Bank of India has recommended the general people to deposit Rs 2,000 banknotes into their bank accounts or exchange them for banknotes of other denominations at any bank branch.
“Deposits into bank accounts can be made in the usual manner, that is, without restrictions and subject to extant instructions and other applicable statutory provisions,” the RBI stated in a statement.
The RBI further stated that beginning May 23, 2023, exchanges of Rs 2,000 banknotes into banknotes of other denominations can be made up to a maximum of Rs 20,000 at a time at any bank in order to maintain operational convenience and avoid disruption of regular activities of bank branches.
Furthermore, the RBI has given all banks till September 30, 2023 to complete exchange or deposit transactions smoothly.
The central bank also instructed banks to stop printing Rs 2,000 banknotes immediately.
After withdrawing the legal tender status of all Rs 500 and Rs 1,000 banknotes in circulation at the moment, the RBI introduced Rs 2,000 banknotes in November 2016 to address the economy’s currency requirements in a timely way.
Once banknotes in other denominations became available in sufficient quantities, the goal of launching Rs 2,000 banknotes was met. As a result, printing of Rs 2,000 banknotes was halted in 2018-19.
According to the announcement, around 89 percent of the Rs 2000 denomination banknotes were issued prior to March 2017 and have reached the end of their anticipated life-span of 4-5 years.
The total value of these banknotes in circulation has decreased from Rs 6.73 lakh crore on March 31, 2018 (37.3 percent of Notes in Circulation) to Rs 3.62 lakh crore on March 31, 2023 (10.8% of Notes in Circulation), according to the announcement.
“As seen during demonetisation, we anticipate that bank deposit accretion will improve marginally in the near term.” This will relieve pressure on deposit rate hikes and may lead to a decrease in short-term interest rates,” says Karthik Srinivasan, Senior Vice President Financial Sector Ratings, ICRA.
