RBI withdraws ₹2000 denomination banknotes, to continue as valid tender

In a move to streamline currency operations and adhere to its Clean Note Policy, the Reserve Bank of India (RBI) has decided to withdraw the ₹2000 denomination banknotes from circulation. However, they will continue to be accepted as legal tender.

The ₹2000 banknote was introduced in November 2016 following the demonetisation of ₹500 and ₹1000 banknotes to hasten replacement of currency. However, the printing of these banknotes was halted in the fiscal year 2018–19 once enough of the other denominations came into circulation.

Statistics released by the RBI indicate that about 89 per cent of the ₹2000 banknotes were issued before March 2017, and they are now reaching the end of their estimated life span of 4–5 years.

The total value of these banknotes in circulation has decreased from ₹6.73 lakh crore at its peak (31 March 2018), accounting for 37.3 per cent of the total notes in circulation, to ₹3.62 lakh crore, constituting only 10.8 per cent of the notes in circulation as of 31 March 2023.

The RBI has observed that the ₹2000 currency notes are not commonly used for transactions, and the stock of banknotes in other denominations is deemed sufficient to meet the currency requirements of the public. Therefore, it has decided to withdraw the ₹2000 notes to optimise currency availability and ensure operational convenience for bank branches.

The general public can still deposit ₹2000 banknotes into their bank accounts or exchange them for banknotes of other denominations at any bank branch. Deposits into bank accounts can be made without restrictions and per existing guidelines and applicable statutory provisions.

To facilitate the transition and avoid disruption of regular banking activities, banks will allow the exchange of ₹2000 notes into other denominations up to a limit of ₹20,000 at a time, starting from 23 May 2023. This will enable individuals to manage their holdings of ₹2000 banknotes effectively.

It is worth noting that the RBI had previously undertaken a similar withdrawal of notes from circulation in 2013–14, aiming to optimise the currency supply and promote efficient transactions within the economy.

With this latest decision, the RBI seeks to maintain an efficient currency system that aligns with the changing requirements of the economy and ensures the availability of adequate currency in various denominations for public use.

As the process of withdrawing the ₹2000 banknotes begins, the RBI said it remains committed to implementing measures that foster a smooth transition and contribute to the overall stability of the Indian financial system.