The Reserve Bank of India (RBI) has announced its decision to withdraw the Rs 2,000 notes from circulation, allowing individuals to exchange or deposit them into their bank accounts until September 30. Starting May 23, the RBI's 19 regional offices, as well as other banks, will accept Rs 2,000 notes in exchange for lower denomination currency. It's important to note that the Rs 2,000 notes will still retain their status as legal tender, as confirmed by the RBI.
The introduction of the Rs 2,000 note took place in November 2016 following Prime Minister Narendra Modi's move to demonetize the high-value Rs 1,000 and Rs 500 notes overnight. However, the RBI has now stated that the objective behind the issuance of Rs 2,000 notes was achieved once an adequate quantity of banknotes in other denominations became available. Consequently, the printing of Rs 2,000 notes was halted in the fiscal year 2018-19, according to an official statement by the RBI.
To ensure smooth operations and prevent disruption to regular banking activities, the RBI has instructed all banks to cease the issuance of Rs 2,000 notes immediately. From May 23, 2023, individuals can exchange their Rs 2,000 notes for banknotes of other denominations, up to a limit of Rs 20,000 at a time, at any bank across the country. This measure will provide operational convenience while facilitating a seamless transition for customers.
It's worth noting that people can deposit or exchange their Rs 2,000 notes for lower denomination currency until September 30, giving individuals ample time to manage their holdings of these banknotes. The RBI revealed that approximately 89% of the Rs 2,000 denomination banknotes were issued prior to March 2017, and they have now reached the end of their estimated lifespan of four to five years.
The value of these banknotes in circulation has declined from a peak of Rs 6.73 lakh crore as of March 31, 2018 (accounting for 37.3% of the total notes in circulation) to Rs 3.62 lakh crore, constituting only 10.8% of the notes in circulation as of March 31, 2023.
The RBI emphasized that the Rs 2,000 note is not commonly used for daily transactions. It is important to note that a similar withdrawal of notes from circulation was undertaken by the central bank in 2013-2014. This move by the RBI aligns with its efforts to maintain an efficient and streamlined currency circulation system in the country.
By withdrawing the Rs 2,000 notes and encouraging the use of lower denomination currency, the RBI aims to enhance the overall functioning of the monetary system while promoting smoother financial transactions for the Indian population.
