Why RBI is withdrawing Rs 2,000 notes from circulation?

Rs 2,000 notes to be withdrawn: The Reserve Bank of India on Friday announced that it will withdraw the circulation of Rs 2,000 currency notes but said that the notes will continue to remain a legal tender. However, there is no need to panic as the RBI has said that citizens can deposit Rs 2,000 notes in banks or exchange them with other currency denominations by September 30, 2023.

The exchange of Rs 2,000 notes into bank notes of other denominations can be made upto a limit of Rs 20,000 at a time at any bank starting from May 23, 2023, the RBI said.

All banks shall provide deposit and/or exchange facilities for Rs 2000 banknotes until September 30, 2023, the reserve bank said.

Why RBI decided to withdraw Rs 2,000 notes?

1. Announcing the decision, the Rs 2,000 denomination banknote was introduced in November 2016 under Section 24(1) of 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 1000 banknotes in circulation at that time.
2. The objective of introducing Rs 2000 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.
3. About 89% of the Rs 2,000 denomination banknotes were issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years.
4. The total value of these banknotes in circulation has declined from Rs 6.73 lakh crore at its peak as on March 31,2018 (37.3% of notes in circulation) to Rs 3.62 lakh crore constituting only 10.8% of notes in circulation on March 31, 2023.
5. It has also been observed that this denomination is not commonly used for transactions.
6. Further, the stock of banknotes in other denominations continues to be adequate to meet the currency requirement of the public.
7. 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 banknotes in Rs 2,000 denomination will continue to be legal tender.
8. Accordingly, members of the public may deposit Rs 2,000 banknotes into their bank accounts and/or exchange them into banknotes of other denominations at any bank branch.
9. 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.
10. The facility for exchange of Rs 2,000 banknotes upto the limit of Rs 20,000/- at a time shall also be provided at the 19 Regional Offices (ROs) of RBI having Issue Departments’ from May 23, 2023.

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