₹2000 Denomination Banknotes – Withdrawal from Circulation; Will continue as Legal Tender

THE RESERVE Bank of India (RBI) Friday announced the withdrawal of its highest value currency note, Rs 2,000, from circulation, adding that the notes will continue to be legal tender. It said the existing Rs 2,000 notes can be deposited or exchanged in banks until September 30, but set a limit of “Rs 20,000 at a time”. It has issued separate guidelines to the Banks in this regard.( ₹2000 Denomination Banknotes – Withdrawal from Circulation; Will continue as Legal Tender)

The central bank advised the public to deposit Rs 2,000 notes — introduced during demonetisation in November 2016, when Rs 500 and Rs 1,000 notes were withdrawn — into their bank accounts and/ or exchange them into notes of other denominations at any bank branch. It also advised banks to stop issuing Rs 2,000 notes with immediate effect.

The Highlight of the RBI circular in this regard is as follows:

• 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 legal tender status of all ₹500 and ₹1000 banknotes in circulation at that time. The objective of introducing ₹2000 banknotes was met once banknotes in other denominations became available in adequate quantities. Therefore, printing of ₹2000 banknotes was stopped in 2018-19.
• 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 ₹6.73 lakh crore at its peak as on 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.
• In view of the above, and in pursuance of the “Clean Note Policy” of the Reserve Bank of India, it was decided to withdraw the ₹2000 denomination banknotes from circulation.
• The banknotes in ₹2000 denomination will continue to be legal tender.
• Members of 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.
• Exchange of ₹2000 banknotes into banknotes of other denominations can be made upto a limit of ₹20,000/- at a time at any bank starting from May 23, 2023.
• All banks shall provide deposit and/or exchange facility for ₹2000 banknotes until September 30, 2023.
• The facility for exchange of ₹2000 banknotes upto the limit of ₹20,000/- at a time shall also be provided at the 19 Regional Offices (ROs) of RBI having Issue Departments¹ from May 23, 2023.
• Exchange of ₹2000 banknotes can be made through BCs upto a limit of ₹4000/- per day for an account holder.
• The Reserve Bank of India has advised banks to stop issuing ₹2000 denomination banknotes with immediate effect.
• Members of the public are encouraged to utilise the time up to September 30, 2023 to deposit and/or exchange the ₹2000 banknotes.

RBI has issued a document on Frequently Asked Questions ( FAQ : https://www.rbi.org.in/Scripts/FAQView.aspx?Id=157). In this document RBI has clarified the minutest queries related to withdrawal of  Rs 2000/-

The reason stated for withdrawal of Rs 2000/- notes is as follows:

Why are ₹2000 denomination banknotes being withdrawn?

The ₹2000 denomination banknote was introduced in November 2016 under Section 24(1) of RBI Act, 1934 primarily with the objective to meet the currency requirement of the economy in an expeditious manner after withdrawal of the legal tender status of all ₹500 and ₹1000 banknotes in circulation at that time. With fulfilment of that objective and availability of banknotes in other denominations in adequate quantities, printing of ₹2000 banknotes was stopped in 2018-19. A majority of the ₹2000 denomination notes were issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years. It has also been observed that this denomination is not commonly used for transactions. Further, the stock of banknotes in other denominations continue to be adequate to meet the currency requirement of the public.

In view of the above, and 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.

What is Clean Note Policy?

The clean note policy was adopted by the RBI to ensure the availability of good quality banknotes to the public. The policy aims to maintain the integrity of the Indian currency by removing damaged, counterfeit, or soiled notes from circulation. Under the clean note policy, banks and financial institutions are required to withdraw unfit or damaged notes from circulation and replace them with new ones. The RBI regularly monitors the quality of currency notes in circulation and sets standards for their acceptability. In December 2013, the RBI issued a statement as part of its clean note policy asking banks to exchange soiled notes of even non-customers and issue only good quality clean notes to the public.

Source: rbi.org.in