Rs 2,000 Bank Notes Withdrawn From Circulation, Legal Tender To Continue

The Reserve Bank of India (RBI) has instructed banks to halt the issuance of Rs 2000 denomination banknotes with immediate effect, although these banknotes will continue to be accepted as legal tender.

In a statement, the RBI said, "The Rs 2000 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. The objective of introducing Rs 2000 banknotes was met once banknotes in other denominations became available in adequate quantities. Therefore, printing of Rs 2000 banknotes was stopped in 2018-19."

"In pursuance of the 'Clean Note Policy' of the Reserve Bank of India, it has been decided to withdraw the Rs 2000 denomination banknotes from circulation. The banknotes in Rs 2000 denomination will continue to be legal tender," the statement said.

The introduction of the Rs 2000 banknote took place in November 2016, under Section 24(1) of the RBI Act, 1934. Its purpose was to meet the urgent currency requirements of the economy after the withdrawal of the legal tender status of Rs 500 and Rs 1000 banknotes in circulation at that time.

Once an adequate quantity of banknotes in other denominations became available, the objective of introducing Rs 2000 banknotes was fulfilled. Consequently, the printing of Rs 2000 banknotes was discontinued in 2018-19.

Approximately 89 per cent of the Rs 2000 banknotes were issued before March 2017 and are now approaching the end of their estimated lifespan of 4-5 years. The total value of these banknotes in circulation has decreased from its peak of Rs 6.73 lakh crore as of March 31, 2018 (constituting 37.3 per cent of the total notes in circulation) to Rs 3.62 lakh crore, accounting for only 10.8 per cent of the total notes in circulation as of March 31, 2023. It has also been observed that this denomination is not commonly used for everyday transactions. Moreover, an adequate supply of banknotes in other denominations is available to meet the currency requirements of the public.

It is worth noting that a similar withdrawal of banknotes from circulation was carried out by the RBI in 2013-2014.

As a result, members of the public are permitted to deposit Rs 2000 banknotes into their bank accounts and/or exchange them for banknotes of other denominations at any bank branch. Deposits into bank accounts can be made in the usual manner, without restrictions and subject to existing instructions and applicable statutory provisions.

To ensure operational convenience and avoid disruption to regular banking activities, the exchange of Rs 2000 banknotes for banknotes of other denominations can be conducted up to a limit of Rs 20,000 at a time at any bank, starting from May 23, 2023.

The RBI has stated that to facilitate a timely completion of this exercise and provide sufficient time to the public, all banks must offer deposit and/or exchange facilities for Rs 2000 banknotes until September 30, 2023. Separate guidelines have been issued to banks to ensure compliance with these measures.