Expect most ₹2,000 bank notes will come back to Central bank: RBI Governor

Reserve Bank of India Governor Shaktikanta Das expects most of the 2,000 rupee notes to return to the central bank. In an interaction, the Governor of the Reserve Bank of India indicated that any decision on the legal status would be taken on the return of the currency.

Last Friday, the Reserve Bank of India announced the withdrawal of the 2,000 rupee notes from circulation.

My advice is to see it as part of the Reserve Bank’s currency management operations. This is the primary purpose. Questions have been raised about the rationale behind the Sept. 30 withdrawal deadline. Unless you specify a specific time, unless you specify a specific time, the process will not achieve a final state. “You have to give time for the ad to be taken seriously,” said Das.

About 89 percent of the ₹2,000 banknotes were issued before March 2017 and are at the end of their 4-5 year lifespan.

The total value of these notes in circulation decreased from ₹6.73-lakh crores at its peak as on 31st March 2018 (37.3 per cent of the notes in circulation), to ₹3.62-lakh, constituting only 10.8 per cent of the notes in circulation on 31st March 2023.

“We expect most of the notes to come back, and that’s our expectation at this point. We’ll see how many notes come back as we get closer to 30… We’ll decide at that point and the nature of the legal tender, we said it’s ongoing. We haven’t said it will or will happen.

He also emphasized that the central bank is sensitive to Indians living abroad or who have gone on a foreign trip, elderly people visiting their children in the US or other countries for six months, and young Indians on H1 visas working in the US and elsewhere.

“Whatever difficulties or any representations we face, it will be our endeavor to address the difficulties people face and complete the whole process in a smooth manner,” he said.

Das does not anticipate any problems regarding the supply of notes. “We have more than enough amounts of printed banknotes already available in the system, not only with the Reserve Bank of India but with the currency funds managed by the banks. There is no cause for concern. We have enough stocks, you don’t have to worry,” he said.

He stressed that the Indian currency management system is very strong and that the exchange rate has remained stable despite the crisis in the financial markets due to the war in Ukraine and the failure of some banks in the West.

He added that the impact of the withdrawal on the economy would be “very marginal,” pointing out that $2,000 banknotes made up only 10.8 percent of the total currency in circulation.

He said the ₹2,000 coins were introduced mainly to replenish the coin which was withdrawn after the 2016 demonetisation. Also, it is similar to the 2014 exercise, when the Reserve Bank of India said it would completely withdraw from circulation all notes issued before 2005.

While withdrawn Rs 2,000 notes can be deposited in bank accounts or exchanged for another currency, banks have been advised to make arrangements for the exchange, he said.