The decision by the Reserve Bank of India (RBI) to withdraw Rs 2,000 notes from the system will help in deposit accretion of banks, said experts.
“With this decision, we may see more people depositing their Rs 2000 notes with the banks and this will result in the deposit of the banks to go up,” said Shekhar Bhandari, President and Business Head, Global Transaction Banking, Kotak Mahindra Bank.
Echoing this, Karthik Srinivasan, Senior Vice-President, Group Head - Financial Sector Ratings, ICRA Ltd. said that during demonetization, the deposit accretion of the banks went up and the same will be seen here.
Also read: From 1946 to 2023, a timeline of demonetisation and rupee note withdrawals in India
“As witnessed during demonetization, we expect the deposit accretion of banks could improve marginally in the near term. This will ease the pressure on deposit rate hikes and could also result in a moderation in short-term interest rates."
Atul Kumar Goel, MD & CEO at Punjab National Bank, said that the decision was taken considering timely measures.
“Everybody who is aiming for it can withdraw it from banks. There is time” said Goel.
In the past, Rs 2000 currency note was not a major issue in transactions on the ground especially in terms of fake currency,” said Goel.
Meanwhile, Montek Singh Ahluwalia, former Deputy Chairman of the Planning Commission of India and Economist, questioned the decision by the RBI to introduce the notes in the very first place.
“The decision raises questions about why they introduced it in the first place,” said Ahluwalia.
Experts also highlighted that the decision is not similar to demonetization and that the central bank is trying to focus on making the economy more digital.
“The decision does not amount to demonetization or anything similar to that, as the said notes will continue to be a legal tender. The action of RBI seems to be more from the clean note policy angle,” said Sudhir Chandi, Director of Resurgent India.
Also read: Phase out 2,000 rupee notes, BJP MP demands in Rajya Sabha
Bhandari highlighted that this decision will bring more focus on digital mediums of payment and that more people will now transact digitally.
“RBI is pushing digitization wisely. Less cash and more digital is the approach by the central bank,” said Bhandari.
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The Reserve Bank of India (RBI) on May 19 said it is withdrawing Rs 2,000 notes from circulation based on a review. However, the banknotes in Rs 2,000 denomination will continue to be legal tender, the RBI said in a release.
"In view of the above, and in pursuance of the “Clean Note Policy” of the Reserve Bank of India, it has been decided to withdraw the Rs 2,000 denomination banknotes from circulation," the RBI said.
The RBI has advised members of the public to deposit Rs 2,000 banknotes into their bank accounts or exchange them for banknotes of other denominations at any bank branch.
Also read: Rs 2,000 note withdrawal: Digital payments may get a push, says former RBI Deputy Governor
"Deposit into bank accounts can be made in the usual manner, that is, without restrictions and subject to extant instructions and other applicable statutory provisions," RBI said in a release.
The RBI further said in order to ensure operational convenience and to avoid disruption of regular activities of bank branches, the 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.
Further, for smooth completion of exchange or deposit, the RBI has provided all banks adequate time until September 30, 2023.
The central bank also advised banks to stop issuing Rs 2,000 denomination banknotes with immediate effect.
The RBI introduced Rs 2,000 banknotes in November 2016 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.