Why RBI decided to withdraw Rs 2,000 note from circulation?

Bongaigaon Times : 19 May 2023: National:

RBI ( Reserve Bank Of India ) advised banks to stop issuing Rs 2000 denomination banknotes with immediate effect. However, the notes will continue to be legal tender. Exchange facility for Rs 2000 banknotes up to Rs 20,000 at a time would be available from May 23, RBI said.

It has been observed that this denomination is not commonly used in transactions. Further, the stock of banknotes in other denominations continues to be adequate to meet the currency requirement of the public. In the view of above and in pursuance of "Clean Note Policy" of the Reserve Bank of India. It has been decided to withdraw the Rs 2000 denomination banknotes from circulation.

An official in the Reserve Bank of India said: “This is a routine exercise and a similar withdrawal of currency notes which had been printed before 2005 was done by the Government in 2013-2014. So nothing more should be read into this move this time around too. This is what other countries, including the United States do from time to time."

The RBI official attributed the move to several reasons. “One, there was the issue of soiled Rs 2,000 notes lying with the RBI. The other was that Rs 2,000 notes are not popular and they are just lying around. They have run their life cycle. Even at the peak of their being in circulation, they did not comprise much of the currency in circulation and, at present, are only 10%-11% of the total currency. When the demonetization of Rs 500 and Rs 1000 notes was done in 2016, they comprised 80% of the total currency in circulation. So there is a huge difference.”

The Rs 2000 denomination banknote was introduced in November 2016 under section 24(1) of the RBI Act, 1934, primarily to meet the currency requirements of the economy.

The bank has asked people to deposit the Rs 2,000 banknotes into their accounts and/or exchange them into banknotes of other denominations at any bank branch. Exchange facility for Rs 2,000 bank notes up to Rs 20,000 at a time would be available from May 23, said an RBI statement.

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Paromita Bhattacharjee
Bongaigaon Times