On 19th May 2023, the Reserve Bank of India announced that it is withdrawing the circulation of ₹2000 currency notes. However, the central bank said that the currency notes will still continue to be legal tender, and added that the public can exchange the notes till 30 September. RBI also said that printing of the high-value banknotes was stopped almost five years ago, and most of the notes in circulation have reached their end of life and have become mutilated.
The Reserve Bank of India has advised banks to stop issuing 2000 denomination banknotes with immediate effect.
In a press release issued by RBI’s Chief General Manager Yogesh Dayal, it is said that in pursuance of the “Clean Note Policy” of the Reserve Bank of India, it has been decided to withdraw the ₹2000 denomination banknotes from circulation.
The press release said, “The 2000 denomination banknote was introduced in November 2016 under Section 24(1) of RBI Act, 1934, primarily to meet the currency requirement of the economy in an expeditious manner after the withdrawal of the legal tender status of all 500 and 1000 rupee banknotes in circulation at that time. The objective of Introducing 2000 rupee banknotes was met once banknotes in other denominations became available in adequate quantities. Therefore, the printing of 2000 rupee banknotes was stopped in 2018- 19.”
Exchange of ₹2000 notes
The RBI said that the public can exchange the ₹2000 banknotes from 23 May to 30 September at any bank. However, only ₹20,000 can be exchanged at time, which means only 10 notes will be changed at a time.
The press release issued by RBI said, “The public may deposit 2000 banknotes into their bank accounts and/or exchange them into banknotes of other denominations at any bank branch. Deposit into bank accounts can be made in the usual manner, that is, without restrictions and subject to extant instructions and other applicable statutory provisions. In order to ensure operational convenience and to avoid disruption of regular activities of bank branches, the exchange of 2000 banknotes into banknotes of other denominations can be made up to a limit of 20,000/- at a time at any bank starting from May 23, 2023. To complete the exercise in a time-bound manner and to provide adequate time to the members of the public, all banks shall provide deposit and/or exchange facility for ₹2000 banknotes until September 30, 2023.”
The central bank added that separate guidelines have been issued to the banks in this matter. The facility for the exchange of 2000 banknotes up to the limit of 20,000/- at a time shall also be provided at the 19 Regional Offices (ROS) of RBI having Issue Departments from May 23, 2023, it said.
It is important to note that the ₹20,000 limit is only for the exchange of notes, that is for taking notes in other denominations by depositing ₹2000 notes. There is no limit on depositing the ₹2000 notes in bank accounts. In such cases, the usual rules of cash deposit will apply, like the requirement of PAN for deposits above ₹50,000.
Although the press release said that the notes can be exchanged till 30 September, reports state that the note will remain legal tender for some time even after some time. “Rs 2000 currency note will remain legal tender after 30th September too. RBI expects that 4 month time is enough for people to exchange notes with the banks. Most of the Rs 2000 notes that are in circulation will return to banks within the given time frame of 30th September. This is a routine exercise of RBI and people need not panic,” a RBI source told ANI.
Most ₹2000 notes have reached end of life
The RBI said that “about 89% of the 2000 denomination banknotes were issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years. The total value of these banknotes in circulation has declined from 26.73 lakh crore at its peak of March 31, 2018 (37.3% of Notes in Circulation) to 3.62 lakh crore constituting only 10.8% of Notes in Circulation on March 31, 2023. It has also been observed that this denomination is not commonly used for transactions. Further, the stock of banknotes in other denominations continues to be adequate to meet the currency requirement of the public.”
RBI clarified that the banknotes in the 2000 denomination will continue to be legal tender and that RBI had undertaken a similar withdrawal of notes from circulation in 2013-2014.
The ₹2000 rupee note was introduced along with the new ₹500 note after demonetisation on 8th November 2016, when existing ₹500 and ₹1000 notes were withdrawn. It was widely speculated at that time that the highest denomination introduced is a temporary provision.
The ₹2000 note is not very popular among consumers and retailers, as it is difficult to return change if it is tendered for a purchase valued much less than the value of the note. As a result, the note has already mostly disappeared from circulation.
