Rs 2000 notes are now getting Banned but Slow

At the end of September 30, 2023 the largest denomination currency of India, Rs 2000/- will lose its value. The RBI issued a notice to the banks to recover these 2000 Rs bills, starting from May 23, 2023. 

RBI has also capped on the amount of notes to be deposit in your bank account or exchange them for other denominations for only 10 notes at a time. Why has the RBI done this?

The new denomination of Rs 2000/- note was introduced in November 2016, immediately after the demonetization of the older Rs. 1000/- note and replacement of Rs. 500/- denominations under Section 24(1) of The RBI Act, 1934.

Now the Reserve Bank of India (RBI) has decided to withdraw these newer Rs 2000 denomination banknotes from circulation, however existing notes will continue to be legal tender. The RBI announced on Friday, May 19, 2023.

RBI has also advised the general public now to deposit the Rs 2000/- notes, which were introduced after the demonetization of Rs 500 and Rs 1000 notes which were withdrawn exercise six years ago. Public can now deposit the Rs 2000/- denominations into their bank accounts and /or exchange them into banknotes of other denominations at any bank branch but only 10 notes at a time.

The RBI highlighted that the Rs 2000 notes prior to March 2017, as the printing of it had stopped over 5 years ago and these notes are now at the end of their estimated lifespan of 4-5 years. It also clarified that this denomination is no longer in common use for transactions and also, there is adequate stock of banknotes in other denominations to meet currency requirements.

“ In view of the above, and 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 RBI said.

What is the Clean Note Policy?

“ The Clean Note Policy seeks to give the public good-quality currency notes and coins with better security features, while soiled notes are withdrawn out of circulation. The RBI had earlier decided to withdraw from circulation all banknotes issued prior to 2005 as they have fewer security features as compared to banknotes printed after 2005. ”

However, the notes issued before 2005 continue to be legal tender. They have only been withdrawn from circulation in conformity with the standard international practice of not having notes of multiple series in circulation at the same time.

So will the Rs 2000 banknotes continue to be legal tender?

“ The Rs 2000 banknote will continue to maintain its legal tender status. Members of the public can continue to use Rs 2000 banknotes for their transactions and also receive them in payment. However, they are encouraged to deposit and/ or exchange these banknotes on or before September 30, 2023, ”

the RBI said.

After September 30

There is no clarification from RBI on the status of these notes after September 30. However, it has said that its instructions on the Rs 2000 notes will be effective until that date.

What should you do with the Rs 2000 notes you have?

“ Public can approach bank branches for deposit and/ or exchange of these banknotes. The facility for deposit into accounts and exchange for Rs 2000 banknotes will be available at all banks until September 30, 2023, a non-account holder of bank also can exchange Rs 2000 banknotes up to a limit of Rs 20,000 at a time at any bank branch. ”

the RBI has said.

" The facility for exchange will also be available until September 30 at 19 RBI Regional Offices that have Issue Departments. "

This move of RBI now makes it difficult for the people hoarding these large denominations.

A person can seek multiple exchanges in packets of Rs 20,000 at a time, but with it is expected to grab the attention of enforcement agencies and the Income-tax Department. Those holding large sums of money in Rs 2000 notes are likely to find it difficult to exchange their money.

Demonitisation Chaos of 2016 - A File Photo

About the chaos like the demonetisation of 2016.

The chaos like 2016 is unlikely like in 2016 this time, as the time window to exchange is notes are wide enough. It is important to note that the printing of Rs 2000 notes was stopped in 2018-19, and they are no longer commonly seen with the public — unlike the ubiquitous Rs 500 and Rs 1000 notes in 2016.

Moreover the decision to withdraw the Rs 500 and Rs 1000 notes in 2016 was more of a sudden announcement, turning the public chaotic. The exchange Rs 2000 notes has begun since May 23rd, so banks and the public have sufficient time till 30th of September 2023.

Advisory for banks by RBI

The RBI has notified to all banks to discontinue issuing of these Rs 2000 denomination banknotes with immediate effect, and to reconfigure ATMs and cash recyclers accordingly.

Banks holding currency chests (CCs) should ensure that no withdrawal of Rs 2000 denomination is allowed from the CCs. All balances held in the CCs should be classified as unfit and kept ready for dispatch to the respective RBI offices.