MUMBAI — In a surprise move, the Reserve Bank on Friday announced withdrawal of INR 2,000 currency notes from circulation but gave public time till September 30 to either deposit such notes in accounts or exchange them at banks.
[bsa_pro_ad_space id=1]Unlike the November 2016 shock demonetisation when old INR 500 and INR 1,000 notes were invalidated overnight, the INR 2,000 notes will continue to be a legal tender till September 30.
In a statement, the Reserve Bank of India (RBI) said it has asked banks to stop issuing INR 2,000 notes with immediate effect.
While the RBI did not specify a limit for depositing the INR 2,000 currency notes in bank accounts, exchange of a maximum of INR 20,000 (10 notes of INR 2,000) for other currency notes will be allowed at a time.
The move comes amid concerns of the highest denomination notes being used to hoard black money. The RBI had stopped printing INR 2,000 notes in 2018-19 and the notes were rarely in circulation.
The INR 2,000 denomination bank note was introduced in November 2016, primarily to meet the currency requirement of the economy in an expeditious manner after the withdrawal of legal tender status of all INR 500 and Rs 1,000 bank notes in circulation at that time.
The RBI said it has also been observed that INR 2,000 denomination note is not commonly used for transactions. Further, the stock of bank notes in other denominations continues to be adequate to meet the currency requirement of the public, it added.
"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 INR 2,000 denomination bank notes from circulation," the RBI said.
The bank notes in INR 2,000 denomination will continue to be a legal tender, it added.
The central bank has asked the public to deposit INR 2,000 bank notes into their bank accounts and/or exchange them into banknotes of other denominations at any bank branch.
"Members of the public are encouraged to utilise the time up to September 30, 2023 to deposit and/or exchange the INR 2,000 bank notes," the central bank said.
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, it said.
"In order to ensure operational convenience and to avoid disruption of regular activities of bank branches, exchange of INR 2,000 bank notes into bank notes of other denominations can be made up to a limit of INR 20,000 at a time at any bank starting from May 23, 2023," the RBI said.
To complete the exercise in a time-bound manner and to provide adequate time to the members of public, the RBI has asked all banks to provide deposit and/or exchange facility for INR 2,000 bank notes until September 30, 2023.
Also, the facility for exchange of INR 2,000 bank notes up to the limit of INR 20,000 at a time shall also be provided at the 19 Regional Offices (ROs) of RBI having Issue Departments from May 23, 2023.
As per the RBI, about 89 per cent of the INR 2,000 denomination banknotes were issued prior to March 2017 and are at the end of their estimated life span of 4-5 years.
The total value of such banknotes in circulation has declined from INR 6.73 lakh crore at its peak as on March 31, 2018 (37.3 per cent of notes in circulation) to INR 3.62 lakh crore constituting only 10.8 per cent of notes in circulation as on March 31, 2023.
In January 2014, the RBI announced withdrawal from circulation all bank notes issued prior to 2005.