The Reserve Bank of India (RBI) has announced the withdrawal of ₹2000 denomination banknotes from circulation, while confirming that they will remain legal tender. The decision comes as part of the RBI’s “Clean Note Policy” and aims to address the declining usage and circulation of the ₹2000 banknotes. The RBI has instructed banks to halt the issuance of ₹2000 banknotes immediately.
Introduced in November 2016 following the demonetization of ₹500 and ₹1000 banknotes, the ₹2000 banknotes were intended to meet the economy’s urgent need for currency. However, with an adequate supply of banknotes in other denominations now available, the objective of the ₹2000 notes has been fulfilled, according to the RBI. The printing of ₹2000 banknotes was halted in 2018-19.
Approximately 89% of the ₹2000 denomination banknotes were issued prior to March 2017 and have reached their estimated life-span of 4-5 years. The total value of these banknotes in circulation has decreased from ₹6.73 lakh crore in March 2018 to ₹3.62 lakh crore in March 2023, constituting only 10.8% of the total notes in circulation. Furthermore, the RBI noted that the ₹2000 denomination is not commonly used for transactions.
To facilitate the withdrawal process, the RBI has set a deadline of September 30, 2023, during which citizens will be able to deposit ₹2000 banknotes into their accounts or exchange them for banknotes of other denominations at any bank branch. The RBI expects that within the four-month period, most of the ₹2000 banknotes in circulation will be returned to banks. The central bank assures the public that this is a routine exercise, urging them not to panic.
In order to minimize disruption and ensure operational convenience at bank branches, the exchange of ₹2000 banknotes into banknotes of other denominations will be limited to ₹20,000 at a time, starting from May 23, 2023.
The RBI emphasized that the stock of banknotes in other denominations is sufficient to meet the currency requirements of the public. It further noted that a similar withdrawal of notes from circulation was carried out by the RBI in 2013-2014.
The public is encouraged to deposit ₹2000 banknotes into their accounts without any restrictions and in compliance with existing instructions and statutory provisions. The RBI’s decision aims to streamline the currency system and promote the usage of banknotes in denominations that are more commonly employed for transactions.