RBI Announces Withdrawal of ₹2000 Banknotes from Circulation
The Reserve Bank of India (RBI) has made a significant decision to withdraw the ₹2000 denomination banknotes from circulation. Although these banknotes will no longer be issued, they will retain their status as legal tender. The move comes as the objective of introducing the ₹2000 banknotes has been fulfilled, and other denominations now adequately meet the currency requirements of the economy.
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Reasons for Withdrawal
The introduction of ₹2000 banknotes in November 2016 was a response to the withdrawal of legal tender status for ₹500 and ₹1000 banknotes. This measure aimed to fulfill the urgent currency requirements at the time. However, the printing of ₹2000 banknotes was halted in 2018-19 as their purpose had been served. Furthermore, the RBI noted that the usage of ₹2000 banknotes for transactions was not common.
Declining Circulation
Approximately 89% of the ₹2000 banknotes were issued before March 2017 and have now reached their estimated life-span of 4-5 years. Consequently, the total value of ₹2000 banknotes in circulation has decreased from ₹6.73 lakh crore at its peak on March 31, 2018, to ₹3.62 lakh crore, constituting only 10.8% of the total notes in circulation as of March 31, 2023. The reduction in circulation and limited usage further prompted the decision to withdraw the ₹2000 banknotes.
Clean Note Policy
The withdrawal of ₹2000 banknotes aligns with the RBI’s “Clean Note Policy.” This policy aims to maintain the quality of currency in circulation and promote efficiency in the banking system. The RBI had previously undertaken a similar withdrawal of notes from circulation in 2013-2014.
Procedures for the Public
To facilitate the withdrawal process, the RBI has provided guidelines for the public. Individuals can deposit ₹2000 banknotes into their bank accounts or exchange them for banknotes of other denominations at any bank branch. Deposits can be made in the usual manner, without any restrictions, subject to existing instructions and statutory provisions.
Exchange Process
In order to ensure operational convenience and minimize disruption to regular banking activities, individuals can exchange their ₹2000 banknotes for banknotes of other denominations. This exchange can be done up to a limit of ₹20,000/- at a time at any bank, starting from May 23, 2023. The RBI’s 19 regional offices and other banks will be involved in this exchange process.
Timeline and Legal Tender Status
While the RBI has initiated the withdrawal process, it emphasizes that the ₹2000 banknotes will remain legal tender. Individuals have until September 30, 2023, to exchange or deposit their ₹2000 banknotes in their bank accounts. After this date, banks may stop accepting ₹2000 banknotes for exchange, although they can still be deposited into bank accounts.
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