In a recent move, the Reserve Bank of India (RBI) has decided to withdraw the Rs 2,000 denomination banknotes from circulation. This decision comes as a majority of these notes, around 89 percent, were issued before March 2017 and have reached their estimated lifespan of four to five years. The introduction of the Rs 2,000 note in November 2016 was a part of the currency management strategy following the demonetization exercise that invalidated all Rs 500 and Rs 1,000 notes at that time.
The RBI has stated that the primary objective for introducing the Rs 2,000 note has been fulfilled, and with an adequate supply of banknotes in other denominations, the printing of Rs 2,000 notes was discontinued in the financial year 2018-19. The central bank has assured the public that there is no need to rush to banks as they have four months to exchange or deposit their Rs 2,000 notes.
RBI Governor Shaktikanta Das has emphasized that the withdrawal of the Rs 2,000 notes is part of the “currency management system” of the central bank. He expects most of the notes to be returned, and a decision on the future of the denomination will be made after September 30. Das has assured people, including those residing abroad, that the RBI will be considerate of their concerns during this transition period.
As of March 31, 2023, the total value of Rs 2,000 notes in circulation had declined to Rs 3.62 lakh crore, constituting only 10.8 percent of the total notes in circulation. In terms of absolute numbers, there were 214 crore Rs 2,000 notes in circulation in 2022, accounting for 1.6 percent of the total currency notes.
The withdrawal of the Rs 2,000 notes falls under the RBI’s “Clean Note Policy,” which was introduced in 1999. The policy aims to provide good quality currency notes and coins while gradually phasing out soiled notes from circulation. Under this policy, banks were instructed to issue only clean notes to the public and discontinue the practice of recycling soiled notes. Measures such as banding note packets instead of stapling them and discouraging writing on currency notes were implemented to increase their lifespan. Banks were also directed to offer facilities for the exchange of soiled and mutilated notes to both customers and non-customers.
The exchange process for the soon-to-be-discontinued Rs 2,000 notes has been made convenient for the public. Individuals can exchange these notes up to Rs 20,000 per day without the need for any forms or slips. The exchange facility will be available from May 23 to September 30, with a possibility of the deadline being extended by the RBI if necessary. It is important to note that even after the deadline, Rs 2,000 notes will remain a valid tender.
The RBI has instructed banks to ensure a smooth exchange process, with special considerations for senior citizens and persons with disabilities. Banks are required to maintain daily data on deposits and exchanges of Rs 2,000 notes and provide facilities such as shaded waiting spaces and drinking water to customers during the summer season.
This withdrawal of the Rs 2,000 notes follows a similar exercise conducted by the RBI in 2013-2014 to replace older banknotes, reflecting the central bank’s commitment to maintaining a robust currency management system and ensuring the circulation of good quality currency notes in the economy.