Reserve Bank of India withdraws 2,000 rupee bank notes from circulation citing ample supply of other denominations

The Reserve Bank of India (RBI) has announced the withdrawal of 2,000-rupee bank notes from circulation in the country today. However, it clarified that the denomination will continue to remain legal tender. The central bank has instructed all commercial banks to cease issuing the 2,000-rupee notes with immediate effect.

According to the RBI’s guidelines, members of the public will be able to deposit their 2,000-rupee bank notes into their bank accounts and also/or exchange them for banknotes of other denominations at any bank branch. The exchange process for the 2,000 rupee bank notes into notes of other denominations will commence on May 23, 2023 and will continue until September 30, 2023. Notably, the exchange of 2,000 rupee banknotes into notes of other denominations will be limited to a maximum value of Rs. 20,000 at a time.

To smoothly facilitate the exchange, the RBI will extend the exchange facility for 2,000 rupee bank notes at its 19 Regional Offices (ROS) across the country, starting from May 23, 2023. The decision to withdraw the 2,000-rupee notes stems from the RBI’s assessment of ample availability of banknotes in other denominations, as explained in their press release.

Finance Secretary, TV Somanathan, clarified that this move is not a form of demonetisation but rather a replacement of the 2,000 rupee notes. The introduction of the 2,000 rupee denomination in November 2016 was initially aimed at swiftly meeting the currency requirement of the economy after the withdrawal of all old 500 and 1,000 rupee bank notes from circulation during demonetisation. With the availability of bank notes in other denominations in sufficient quantities, the objective of introducing the 2,000 rupee bank notes was deemed fulfilled, leading to the cessation of their printing in 2018-19.

Statistics provided by the RBI highlight that approximately 89% of the 2,000-rupee banknotes were issued before March, 2017 and are nearing the end of their estimated life-span of 4-5 years. As of March 31, 2023, the total value of these banknotes in circulation has decreased from 6.73 lakh crore to 3.62 lakh crore, accounting for only 10.8% of the total notes in circulation. Furthermore, it has been observed that the 2,000 rupee denomination is not widely utilised for everyday transactions. The RBI has assured the public that an adequate stock of banknotes in other denominations remains available to meet the currency requirements of the citizens.

The announcement of the withdrawal of 2,000-rupee notes caused a significant surge in online traffic, leading to the official website of the RBI crashing temporarily.