RBI withdraws ₹2,000 notes from circulation

The Reserve Bank of India (RBI) on Friday announced the withdrawal of the ₹2,000 denomination notes from circulation, advised people to exchange or deposit the notes by September 30, but assured that they would remain legal tender.

The announcement and the deadline, which is at odds with the assurance that the notes would remain legal tender, caused a stir and evoked memories of demonetisation, when the government scrapped high value ₹ 1,000 and ₹ 500 notes overnight in November 2016, although the RBI was at pains to reiterate that the move was prompted by its “Clean Note Policy".

Banks will start exchanging notes from May 23 and people can exchange ₹2,000 banknotes up to a limit of ₹20,000 at a time. In remote locations, an account holder can get it exchanged through business correspondents (BCs) up to a limit of ₹4,000 per day, reports Hindustan Times quoting RBI.

While an FAQ issued by RBI on Friday said that “members of the public can continue to use ₹2,000 banknotes for their transactions and also receive them in payment”, it added that “they are encouraged to deposit and/or exchange these banknotes on or before September 30, 2023”, It is likely that RBI will announce a mechanism to deposit or exchange the notes past the deadline.

RBI also said that there is no limit on deposit of ₹2,000 banknotes into a bank account, but that may require details such as PAN and Aadhaar or other documents. “Deposit into bank accounts can be made without restrictions subject to compliance with extant Know Your Customer (KYC) norms and other applicable statutory/regulatory requirements,” it said.

RBI stopped printing ₹2,000 notes about four years ago. Both the central bank and the government have maintained that currency of this denomination was a transitory arrangement to restock the economy with cash after demonetisation.

“The objective of introducing ₹2,000 banknotes was met once banknotes in other denominations became available in adequate quantities. Therefore, printing of ₹2,000 banknotes was stopped in 2018-19,” RBI said in a statement.

According to the central bank, about 89 per cent of the ₹2,000 denomination banknotes, issued prior to March 2017, are at the end of their estimated life-span of four to five years, and in pursuance of its “Clean Notes Policy”, it has decided to withdraw the high denomination banknotes from circulation.

“The Reserve Bank of India has advised banks to stop issuing ₹2000 denomination banknotes with immediate effect,” it added in a statement.

RBI also added in its statement that it had similarly withdrawn bank notes from circulation in 2013-14.

That move was aimed at withdrawing banknotes with fewer security features that were printed before 2005. However, there was no deadline at the time and the banknotes remained legal tender.