The introduction of the Rs. 2,000 notes in November 2016 was made possible by Section 24(1) of the RBI Act, 1934, which permits the central bank to issue notes of any denomination up to Rs. 10,000. This move was made primarily to meet the economy’s immediate need for cash following the large-scale demonetisation exercise, in which all Rs. 500 and Rs. 1,000 banknotes in circulation at the time lost their legal tender status.
“With that goal achieved and adequate supplies of banknotes in other denominations available, the printing of Rs. 2,000 notes was discontinued in 2018–19,” the RBI stated.
Shaktikanta Das, governor of the RBI, stated today that the exercise is a part of the central bank’s “currency management system” and that there is “no need to rush to banks” because people have four months to exchange or deposit 2,000 notes.
The majority of the notes, according to Mr Das, should be returned. After September 30th, we will decide our next course of action. But it will remain legal tender, he said, assuring the populace—including those who were living abroad—that the RBI would be attentive to all of their issues.
The central bank noted that 2,000 notes are not frequently used for transactions and that the majority of them (89%) were issued before March 2017 and are nearing the end of their estimated four to five-year life span.
The total value of these banknotes in circulation decreased from 6.73 lakh crore, which represented 37.3% of all notes in circulation as of March 31, 2018, to 3.62 lakh crore, which represented only 10.8% of all notes in circulation on March 31, 2023, according to the RBI.
Absolute numbers show that there were 274 crore 2,000 notes in circulation in 2020, making up 2.4% of all currency notes. This number fell to 245 crore (2,000) in 2021 (2%), and further fell to 214 crore (2,000rs) in 2022.
According to the RBI, it also has an adequate supply of banknotes in other denominations.
What exactly does the “Clean Note Policy” entail?
The central bank’s “Clean Note Policy” saw the withdrawal of Rs 2,000 notes.
The RBI’s “Clean Note Policy,” which was implemented in 1999, aims to provide good quality currency notes and coins while removing soiled notes from circulation. The Reserve Bank then directed banks to issue only high-quality clean notes to the public and to refrain from recycling soiled notes received at their counters.
Several other steps were taken, such as instructing banks to discontinue stapling note packets and instead band the packets with paper/polythene bands to extend the life of currency notes. People were also warned not to write on the currency notes, and banks were told to provide unrestricted exchange services for soiled and mutilated notes. According to Reserve Bank instructions, currency chest branches of banks must offer good quality notes and coins to non-customers in exchange for soiled and mutilated notes.
How will the exchange facility operate?
The State Bank of India, India’s largest public bank, clarified yesterday that no form or slip will be required when exchanging or depositing 2,000 notes.
According to government sources, people can exchange 2,000 rupee notes up to 20,000 times per day. They stated that a person must stand in a queue and that they may return and stand in the same queue after exchanging money. The upper limit of 20,000 is set to ensure operational convenience and to avoid disrupting regular bank branch activities.
The exchange facility will be open from May 23 to September 30. According to sources, the RBI may extend the deadline to exchange or deposit the notes from September 30 if necessary, but even if anyone has a 2,000 note after the current deadline, it will remain a valid tender.
The RBI Governor stated that if they hadn’t specified a time, people would not have taken it seriously and exchanged notes.
A person does not have to be a bank customer to exchange the soon-to-be-discontinued currency with them.
Bank instructions issued by the RBI
The RBI clarified that there is no fee to use the exchange facility. Banks have also been told to make arrangements to make it easier for senior citizens and people with disabilities to exchange or deposit 2,000 banknotes.
In a new circular issued today to banks, the RBI directed them to keep daily data on deposits and the exchange of 2,000 notes in a simple, fixed format. It has also requested that they provide customers with amenities such as shaded waiting areas and drinking water during the summer.
In 2013-2014, the RBI conducted a similar withdrawal of notes from circulation.
