₹2,000 currency notes withdrawn; legal tender until September 30
The Reserve Bank of India decided to withdraw the 2000 denomination notes from circulation even after it reiterated that these notes would continue to be legal tender. This comes about six and a half years after the 1,000 and 500 rupee notes were put out of circulation.
The move is significant, and comes immediately after the state assembly elections in Karnataka, where Congress won, and in the run-up to elections in other states and the 2024 general election.
From May 23, the RBI said all bank branches will provide the facility to exchange 2,000-rupee notes into notes of other denominations up to a maximum of 20,000 rupees at a time.
All banks will provide deposit and/or exchange facilities for $2,000 banknotes until September 30, 2023.
The INR 2,000 notes were introduced after the government announced on November 8, 2016, that the 1,000 and 500 rupee notes (Specified Banknotes or SBNs) would be out of circulation.
The government then said that the SBNs were demonetized to fight corruption, black money and counterfeit currency.
Madan Sabnavis, Chief Economist, Bank of Baroda said: “This is demonization with a human face. People have time until the end of September 2023, to deposit and/or cash out R2,000 notes. The common man should not be affected.
sectors most affected
The three sectors affected by this step are gold, jewellery, real estate and political parties. In the run-up to the election, there is always a tendency to accumulate money. “
The Reserve Bank of India said that members of the public can deposit $2,000 worth of notes into their bank accounts and/or exchange them for notes of other denominations at any bank branch.
Deposits to bank accounts can be made in the usual way, without restrictions and subject to the applicable instructions and other applicable legal provisions.
To ensure operational convenience and avoid disruption to the normal activities of bank branches, RBI said exchange of ₹ 2,000 banknotes into banknotes of other denominations can be up to ₹ 20,000 at a time in any bank from May 23, 2023.
To complete the exercise in a time-bound manner and provide sufficient time for members of the public, all banks must provide deposit and/or exchange facilities for $2,000 banknotes through September 30, 2023.
The central bank said that the facility for exchanging 2,000-rupee notes to a maximum of 20,000 rupees at a time will also be made available at 19 Regional Offices (ROs) with issuance departments.
“The Reserve Bank of India has advised banks to stop issuing the €2,000 notes with immediate effect. Members of the public are encouraged to take advantage of the time until September 30, 2023 to deposit and/or exchange the €2,000 notes.
Printing ceased in 2018-19
RBI said the goal of introducing 2000 denomination coins was achieved once notes of other denominations became available in sufficient quantities. Therefore, printing of $2,000 banknotes was discontinued in 2018-19.
About 89 percent of the ₹2000 banknotes were issued before March 2017 and are at the end of their 4-5 year lifespan.
The Reserve Bank of India said that the total value of these notes in circulation has decreased from ₹6.73 crore at its peak on 31st March 2018 (37.3 per cent of the notes in circulation) to ₹3.62 crores, constituting only 10.8 per cent of the notes in circulation on 31st March 2023 .
“It has also been noted that this denomination is not commonly used in transactions. Moreover, the stock of banknotes of other denominations is still sufficient to meet the currency requirements of the public.”
Experts take
Karthik Srinivasan, Senior Vice President, Financial Sector Ratings, ICRA, noted that as seen during de-trading, deposit build-up in banks could improve marginally in the near term. This will relieve pressure to raise deposit rates and could also lead to an adjustment in short-term interest rates.
Banking expert Viswanathan said: “This is a good move. But each time only 10 banknotes of INR 2,000 can be exchanged. Anyone can go back because the limitation is “at one time”.
So managing crowds at branches could become difficult. Instead, the RBI should allow $50,000 at a time. Any amount beyond that should be credited to properly opened KYC accounts. Also, anyone may be asked to The exchange will more than once comply with due diligence and KYC when the amount exceeds 50,000 Russian rubles.