• Reserve Bank of India (RBI) to Withdraw Rs 2000 Notes, but They Will Remain Valid.

Mumbai, May 19, 2023 –

• The Reserve Bank of India (RBI) announced today that it will be taking the Rs 2,000 notes out of circulation after conducting a review.
• However, the existing Rs 2,000 banknotes will still be accepted as legal tender, according to an RBI statement.
• The RBI stated, “Considering the above and as part of the Reserve Bank of India’s ‘Clean Note Policy,’ it has been decided to withdraw the Rs 2,000 denomination banknotes from circulation.”
• The RBI advised the public to either deposit their Rs 2,000 banknotes into their bank accounts or exchange them for banknotes of other denominations at any bank branch.
• “Deposits into bank accounts can be made in the usual manner, without any restrictions, following existing instructions and applicable statutory provisions,” the RBI added.
• To ensure smooth operations and minimize disruption at bank branches, the exchange of Rs 2,000 banknotes for banknotes of other denominations will be permitted up to a limit of Rs 20,000 at a time, starting from May 23, 2023.
• To facilitate the exchange or deposit process, the RBI has given all banks ample time until September 30, 2023.
• Additionally, the RBI instructed banks to discontinue the issuance of Rs 2,000 denomination banknotes with immediate effect.
• Rs 2,000 banknotes were introduced by the RBI in November 2016 to quickly meet the currency requirements of the economy after the withdrawal of the legal tender status of Rs 500 and Rs 1,000 banknotes at that time.
• Once an adequate quantity of banknotes in other denominations became available, the purpose of introducing Rs 2,000 banknotes was fulfilled. As a result, the printing of Rs 2,000 banknotes ceased in 2018-19.
• According to the RBI, approximately 89% of the Rs 2,000 denomination banknotes were issued prior to March 2017 and have reached their estimated lifespan of 4-5 years.
• The total value of these banknotes in circulation has decreased from its peak of Rs 6.73 lakh crore on March 31, 2018 (37.3% of the total notes in circulation) to Rs 3.62 lakh crore, accounting for only 10.8% of the total notes in circulation as of March 31, 2023.
• Karthik Srinivasan, Senior Vice President Financial Sector Ratings at ICRA, commented, “As observed during demonetization, we expect that bank deposits could see a slight increase in the near term.
• This will relieve the pressure on deposit rates and may result in a moderation of short-term interest rates.”