In a recent circular issued on Friday, the Reserve Bank of India (RBI) has advised banks to halt the issuance of Rs 2,000 denomination banknotes with immediate effect. The circular also states that all existing Rs 2,000 currency notes must be exchanged before September 30, 2023.
The RBI’s circular emphasizes the need for a time-bound approach and provides a deadline to ensure a smooth transition for the public. “To complete the exercise in a time-bound manner and to provide adequate time for the members of the public, all banks shall provide deposit and/or exchange facilities for Rs 2,000 banknotes until September 30, 2023,” the RBI circular read.
The circular further sheds light on the origin of the Rs 2,000 denomination banknote, stating, “The Rs 2,000 denomination banknote was introduced in November 2016 under Section 24(1) of the RBI Act, 1934, primarily to meet the currency requirement of the economy in an expeditious manner after the withdrawal of legal tender status of all Rs 500 and Rs 1,000 banknotes in circulation at that time. The objective of introducing Rs 2,000 banknotes was achieved once banknotes in other denominations became available in sufficient quantities. Consequently, the printing of Rs 2,000 banknotes was halted in 2018-19.”
Elaborating on the decision, the RBI explained, “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 Rs 6.73 lakh crore at its peak as of March 31, 2018 (constituting 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. Additionally, it has been observed that this denomination is not commonly used for transactions. Furthermore, the stock of banknotes in other denominations continues to be sufficient to meet the currency requirements of the public.”
The RBI’s directive marks a significant development in the currency landscape of India, as the Rs 2,000 banknote will be phased out gradually over the coming months. The move aims to streamline the circulation of banknotes and align it with the evolving requirements of the Indian economy. The RBI’s decision takes into account the reduced usage of Rs 2,000 banknotes and the availability of an adequate supply of banknotes in other denominations.
It is important for the public to be aware of this development and take necessary steps to exchange any remaining Rs 2,000 banknotes before the deadline of September 30, 2023. Banks will continue to provide deposit and/or exchange facilities for these banknotes during this period. This move by the RBI is part of its ongoing efforts to ensure an efficient and effective currency system in the country.
As the transition period begins, individuals and businesses are encouraged to adapt to the evolving currency landscape by utilizing other denominations for their transactions. The RBI remains committed to ensuring a smooth transition and maintaining the overall stability of the Indian economy.
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