RBI act on a Clean Note Policy!

May 22, 2023

The Rs2000 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 Rs500 and Rs1000 banknotes in circulation at that time. The objective of introducing Rs2000 banknotes was met once banknotes in other denominations became available in adequate quantities. Therefore, printing of Rs2000 banknotes was stopped in 2018-19.

In the row, Saiyam Mehra, Chairman, GJC said, “The implementation of GST and BIS hallmarks has encouraged jewellery manufacturers to become organized and carry out formal business. Large-denomination currency notes are normally required to deal in cash, which has now become insignificant in India’s jewellery industry and consumers are more inclined towards digital formats. Therefore, the withdrawal of Rs 2000 currency notes will not have a major impact on India’s gold and jewellery business.”

RBI said, about 89% of the Rs2000 denomination banknotes were issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years. The total value of these banknotes in circulation has declined from Rs6.73 lakh crore at its peak as on March 31, 2018 (37.3% of Notes in Circulation) to Rs3.62 lakh crore constituting only 10.8% of Notes in Circulation on March 31, 2023.

It has also 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 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 Rs2000 denomination banknotes from circulation.

The banknotes in Rs2000 denomination will continue to be legal tender. It may be noted that RBI had undertaken a similar withdrawal of notes from circulation in 2013-2014. Accordingly, members of the public may deposit Rs2000 banknotes into their bank accounts and/or exchange them into banknotes of other denominations at any bank branch.

Deposit into bank accounts can be made in the usual manner, that is, without restrictions and subject to extant instructions and other applicable statutory provisions. In order to ensure operational convenience and to avoid disruption of regular activities of bank branches, exchange of Rs2000 banknotes into banknotes of other denominations can be made upto a limit of Rs20,000/- at a time at any bank starting from May 23, 2023.

To complete the exercise in a time-bound manner and to provide adequate time to the members of public, all banks shall provide deposit and/or exchange facility for Rs2000 banknotes until September 30, 2023. Separate guidelines have been issued to the banks.

The facility for exchange of Rs2000 banknotes upto the limit of Rs20,000/- at a time shall also be provided at the 19 Regional Offices (ROs) of RBI having Issue Departments1 from May 23, 2023. The Reserve Bank of India has advised banks to stop issuing Rs2000 denomination banknotes with immediate effect.

Members of the public are encouraged to utilise the time up to September 30, 2023 to deposit and/or exchange the Rs2000 banknotes. A document on Frequently Asked Questions (FAQs) in the matter has been hosted on the RBI website for information and convenience of the public.

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