The Reserve Bank of India (RBI) has recently announced the gradual withdrawal of ₹2000 denomination notes from circulation, stating that they have served their purpose. Here are the key details you need to know about this development.
Reason for Phasing Out ₹2000 Notes
The ₹2000 notes were introduced in November 2016 to meet the currency requirement during the demonetisation of ₹500 and ₹1000 notes. According to the RBI, these notes have fulfilled their intended purpose. The printing of new ₹2000 notes ceased in FY19, and most of the existing notes are now reaching the end of their life span. The RBI’s decision to withdraw these notes aligns with its ‘clean note policy.’ The central bank assures that the stock of banknotes in other denominations is sufficient to meet the public’s currency requirements.
Legal Tender Status
Despite the phasing out, the ₹2000 notes will continue to remain legal tender. Individuals can still use these notes for purchases and receive them as payment. However, the RBI encourages the public to exchange their ₹2000 notes from banks by 30 September. The RBI has also directed banks to cease issuing ₹2000 denomination banknotes with immediate effect.
Exchange Process and Restrictions
There are no specific restrictions on exchanging ₹2000 banknotes. However, certain procedures related to customer due diligence will apply. The RBI has set a limit of ₹20,000 for one-time exchange. If an individual needs to exchange an amount exceeding ₹20,000, they can deposit it into their bank account and withdraw the funds. Importantly, even non-account holders can exchange Two thousand banknotes up to a limit of ₹20,000 at any bank branch.
Future Decision and Disruption
It remains to be seen what decision the government will make regarding the ₹2000 notes after the exchange period ends. By that time, most of these notes are expected to be out of circulation. However, the phasing out of Two thousand notes is unlikely to cause significant disruption. Since the demonetisation in November 2016, digital payments in India have grown substantially, reducing reliance on cash. The total value of ₹2000 denomination banknotes in circulation has decreased significantly, from ₹6.73 trillion (37.3% of total notes) on 31 March 2018 to ₹3.62 trillion (10.8% of total notes) on 31 March 2023. Additionally, the RBI notes that Two thousand notes are not commonly used for transactions.
The RBI’s decision to phase out Two thousand denomination notes is driven by the fulfilment of their intended purpose and the implementation of a clean note policy. While these notes will continue to be legal tender, the RBI encourages the public to exchange them from banks by 30 September. The process allows both account holders and non-account holders to exchange ₹2000 banknotes. The phasing out is not expected to cause significant disruption, considering the increased adoption of digital payment methods and the decreasing reliance on cash in India.
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