The Reserve Bank of India (RBI) has announced its decision to phase out the circulation of Rs 2,000 denomination banknotes, although these notes will remain legal tender, as stated in a circular issued on Friday.The RBI has instructed banks to cease issuing Rs 2,000 denomination banknotes with immediate effect.
In the circular released on Friday, the central bank outlined that all Rs 2,000 currency notes must be exchanged before September 30, 2023.”To ensure a timely process and allow sufficient time for the general public, all banks are required to offer deposit and/or exchange services for Rs 2,000 banknotes until September 30, 2023,” read the RBI circular.
Additionally, to streamline operations and minimize disruptions to regular bank activities, the central bank has permitted the exchange of Rs 2,000 notes for other denominations up to a limit of Rs 20,000 at any branch, starting from May 23.
The circular further explained, “The introduction of the Rs 2,000 denomination banknote in November 2016, under Section 24(1) of the RBI Act, 1934, was primarily aimed at swiftly meeting the economy’s currency demand following the withdrawal of legal tender status for all Rs 500 and Rs 1,000 banknotes in circulation at that time.
Once an adequate supply of banknotes in other denominations became available, the purpose of introducing Rs 2,000 banknotes was fulfilled, leading to the cessation of their printing in 2018-19.”Providing insight into the decision, the RBI stated, “Approximately 89% of the Rs 2,000 denomination banknotes were issued prior to March 2017 and have reached the end of 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 as of March 31, 2018 (accounting for 37.3% of Notes in Circulation) to Rs 3.62 lakh crore, constituting only 10.8% of Notes in Circulation as of March 31, 2023. It has also been observed that this denomination is not commonly used for transactions. Furthermore, the supply of banknotes in other denominations remains adequate to meet the public’s currency requirements.”