Asks all to exchange or deposit them by Sept. 30

New Delhi: The Reserve Bank of India (RBI) made an announcement last evening regarding the withdrawal of Rs. 2,000 note, the highest value currency note in circulation.

However, the RBI clarified that these notes would still be considered legal tender. Existing Rs. 2,000 notes can be deposited or exchanged in banks until Sept. 30, with a limit of Rs. 20,000 at a time.

The central bank advised the public to deposit their Rs. 2,000 notes, which were introduced during the demonetisation in November 2016 when Rs. 500 and Rs. 1,000 notes were withdrawn, into their bank accounts or exchange them for notes of other denominations at any bank branch. Furthermore, the RBI instructed banks to cease issuing Rs. 2,000 notes immediately.

To ensure convenience and avoid disruptions in bank operations, the exchange of Rs. 2,000 banknotes can be conducted up to a limit of Rs. 20,000 at a time, starting from May 23, at any bank. Additionally, all banks are required to offer deposit and/or exchange services for Rs. 2,000 banknotes until Sept 30, 2023, in order to allow sufficient time for the public to complete the process. Deposits into bank accounts can be made without restrictions, following the usual procedures and applicable regulations, as per the RBI.

This is a routine exercise, similar to the withdrawal of currency notes printed before 2005 carried out by the government in 2013-2014. This move should not be interpreted differently, as it is a practice followed by various countries, including the United States,         from time to time.

According to the RBI, around 89 percent of the Rs. 2,000 notes were issued prior to March 2017 and have now reached their estimated lifespan of four to five years. The total value of these banknotes in circulation has decreased from its peak of Rs. 6.73 lakh crore as of Mar. 31, 2018 (37.3% of total notes in circulation) to Rs. 3.62 lakh crore, which now constitutes only 10.8 percent of notes in circulation as of Mar. 31, 2023.

It is worth noting that the RBI had previously undertaken a similar withdrawal of notes from circulation in 2013-2014. The introduction of the Rs. 2,000 note in November 2016, under Section 24(1) of the RBI Act, 1934, aimed to meet the immediate currency requirements of the economy after the withdrawal of legal tender status for all Rs. 500 and Rs. 1,000 notes in circulation at that time.