New Delhi May 19 2023: In a surprise move, Reserve Bank of India on Friday said it has been decided to withdraw Rs 2,000 bank notes from circulation. However, RBI said bank notes of Rs 2,000 denomination will continue to be legal tender.
Reserve Bank of India explained the rationale behind the move being "banknotes in other denominations are available in adequate quantities".
RBI said these notes are to be exchanged at banks on or before September 30, 2023.
"Members of the public can continue to use Rs 2,000 banknotes for their transactions and also receive them in payment. However, they are encouraged to deposit and/or exchange these notes on or before September 30, 2023," said RBI.
"About 89% of the Rs 2,000 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 Rs 6.73 lakh crore at its peak as on March 31, 2018 (37.3% of notes in circulation) to Rs 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 said in a statement.
"Rs 2,000 currency note will remain legal tender after September 30 too. RBI expects that four-month time is enough for people to exchange notes with the banks. Most of the Rs 2,000 notes that are in circulation will return to banks within the given time frame of September 30. This is a routine exercise of RBI and people need not panic," ANI quoted government sources minutes after the highest-denomination banknote was withdrawn from circulation.
The Rs 2,000 denomination banknote was introduced in November 2016, primarily to meet the currency requirement of the economy in an expeditious manner after the withdrawal of the legal tender status of all Rs 500 and Rs 1,000 banknotes in circulation at that time.
"In order to ensure operational convenience and to avoid disruption of regular activities of bank branches, exchange of Rs 2,000 banknotes into banknotes of other denominations can be made upto a limit of Rs 20,000 at a time at any bank starting from May 23, 2023," RBI said.
Karthik Srinivasan, Senior Vice President Financial Sector Ratings, ICRA said: "As witnessed during demonetisation, we expect the deposit accretion of banks could improve marginally in near term. This will ease the the pressure on deposit rates hikes and could also result in moderation in short-term interest rates."