RBI recalls all Rs 2,000 currency notes from circulation

RBI withdraws Rs2000 notes from circulation

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.

"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.

The objective of introducing Rs 2,000 banknotes was met once banknotes in other denominations became available in adequate quantities. Therefore, the printing of Rs 2,000 banknotes was stopped in 2018-19.

About 89 percent of the Rs 2000 denomination banknotes were issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years, the release said.

The total value of these banknotes in circulation has declined from Rs 6.73 lakh crore at its peak of March 31, 2018 (37.3 percent of Notes in Circulation) to Rs 3.62 lakh crore constituting only 10.8 percent of Notes in Circulation on March 31, 2023, the release added.

"As witnessed during demonetisation, we expect the deposit accretion of banks could improve marginally in near term. This will ease the pressure on deposit rate hikes and could also result in moderation in short-term interest rates,"says Karthik Srinivasan, Senior Vice President Financial Sector Ratings, ICRA.