On May 19, 2023, the Reserve Bank of India (RBI) has decided to withdraw the Rs 2000 denomination banknotes from circulation. However, it will continue to be used in legal tender.
The RBI has advised banks to stop issuing Rs 2000 banknotes with immediate effect. It has also released a circular that all Rs 2000 currency notes should be exchanged before September 30, 2023.
As per the RBI circular, “To complete the exercise in a time-bound manner and for providing adequate time for the members of the public, all banks shall provide deposit and exchange facilities for Rs 2000 notes until September 30, 2023.”
The central bank also said that in order to provide operational convenience and to avoid the disruption of the regular activities of bank branches, the exchange of Rs 2000 notes into the notes of other denominations can be made up to a limit of Rs 20,000 at a time at any branch starting from May 23, 2023.
The Rs 2000 denomination currency note was introduced in November 2016 following the demonetisation of Rs 1000 and old Rs 500 notes. According to the RBI, the objective of introducing the RS 2000 was met once the currency in other denominations became available in adequate quantities.
Explaining the move, the RBI said, “About 89 per cent of RS 2000 denomination banknotes was issued prior to March 2017and are the end of their estimated lifespan of four to five years. The total value of the banknotes in circulation has declined from Rs 6.73 lakh crore at its apex as on March 31, 2018, i.e., thirty-seven of the notes in circulation to Rs 3.62 lakhs crore which constitute only 10.8 per cent of notes in circulation of on March 31, 2023.
It has been observed that this denomination is not commonly used for transactions. Further, the stock of banknotes in other denominations continues to be adequate to meet the currency requirement of the public.”
“In the view of the above, and in pursuing the “Clean Note Policy” of the Reserve Bank of India, it has been decided to withdraw RSs 2000 denomination banknotes from circulation”, the circular read.
Earlier, “Prime Minister Narendra Modi on November 8, 2016, launched a massive assault on the ‘shadow economy’, aka ‘black economy’, via Demonetisation of old Rs 500 and Rs 1,000 notes, which was one of its kind moves, for its sheer size, scale and timing, as 86% of the currency which was high value in the denomination was retired and declared illegal tender. From 53% in 2004 to 28% in 2009 and then 13% in 2013 under a rudderless and incompetent Congress, the share of small denomination notes fell consistently, which was always a matter of grave concern. Demonetisation undid this unhealthy trend, and between April 2017 and December 2017, low-value denomination currency notes rose to 48% of the overall currency. This, in itself, is an ample justification for supporting Demonetisation, both in theory and practice.”
A five-judge bench of the Supreme Court, presided over by Justices S Abdul Nazeer, BR Gavai, AS Bopanna, V Ramasubramanian and BV Nagarathna dismissed a petition on January 2, 2023, challenging the Union Government’s 2016 exercise to demonetise currency notes of Rs 1,000 and Rs 500. This came in after the Court had reserved its decision on December 7, following Vivek Narayan Sharma v. Union of India and Ors. The Supreme Court had earlier directed the Union Government and the Reserve Bank of India (RBI) to place before it the pertinent records relating to the government’s 2016 decision to demonetise the said denominations.
When the Union Government made the announcement in 2016, it aimed at tracking counterfeit currency, eliminating Fake Indian Currency Notes (FICN), bringing tax evasion to a halt, cutting off the supply line money to terror-funding and curbing black money, among other goals. The Supreme Court heard a batch of 58 petitions challenging the demonetisation exercise declared by the Government.