Not demonetisation! Rs 2000 notes to be withdrawn from circulation, will remain legal tender even after September 30

Withdrawal of Rs 2000 notes by RBI: Is it soft demonetisation? The Reserve Bank of India on Friday, May 19, said Rs 2000 currency notes will be withdrawn from circulation but they will continue to be legal tender.

Rs 2000 notes news
Rs 2000 notes to be withdrawn from circulation. Representational image

In what was termed by many on social media as a soft demonetisation move, the Reserve Bank of India (RBI) on Friday surprised everyone by announcing that Rs 2000 currency notes will be withdrawn from circulation but they will continue to be legal tender.

However, this is not a demonetisation exercise as it happened in November 2016 when the Government banned Rs 500 and Rs 1000 currency notes.

Instead, the RBI on Friday said that Rs 2000 notes will continue to remain legal tender and the public can either deposit or exchange their Rs 2000 notes slowly till September 30, 2023. The Rs 2000 banknotes will remain legal tender even after September 30.

“…in pursuance of the “Clean Note Policy” of the Reserve Bank of India, it has been decided to withdraw the ₹2000 denomination banknotes from circulation. The banknotes in ₹2000 denomination will continue to be legal tender,” RBI said on Friday (May 19, 2023).

The RBI said that the public may deposit Rs 2,000 banknotes into their bank accounts and or exchange them with banknotes of other denominations in banks until September 30, 2023.

Explaining the reason for withdrawing Rs 2000 notes from circulation, RBI said, “A majority of the ₹2000 denomination notes were issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years. It has also been observed that this denomination is not commonly used for transactions. Further, the stock of banknotes in other denominations continue to be adequate to meet the currency requirement of the public.

Must Read: Rs 2000 deposit, exchange last date: Daily limit, where you can return Rs 2000 notes and from when

The facility for the exchange of Rs 2000 banknotes up to the limit of Rs 20,000 at a time will also be provided at the 19 Regional Offices (ROs) of RBI having Issue Departments from May 23, 2023.

As per experts, the RBI’s decision to withdraw Rs 2000 notes from circulation was not surprising as the life span of such notes was about to end.

Commenting on the RBI’s decision, Rachit Sharma, DGM, Taxmann, said, “The RBI decided to discontinue the Rs 2,000 banknotes because the life span of such notes is about to end, and they constitute just 10.8% of the overall notes in circulation as of 31-03-2023.”

“The Rs. 2,000 currency note will remain legal tender until 30th September. It is not yet clear whether the Bank will ask for the Aadhaar and PAN to exchange the currency note,” he added.

Vimal Nadar, Head of Research at Colliers India said, “The withdrawal of INR 2000 rupee-denominated notes is an expected and timely move towards prudent currency management within the realm of maintaining banking and financial discipline. Such measures further reduce/ eliminate the probable cash component in high-value real estate transactions. In the last few years, RERA and demonetisation have brought in significant levels of transparency in real estate, mainly contributing to fair market price determination.”

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First published on: 19-05-2023 at 19:08 IST