Withdrawal of 2000 denomination note
Why in news? The Reserve Bank of India (RBI) decided to withdraw ₹2,000 denomination banknotes from circulation in pursuance of its “Clean Note Policy”. However, the ₹2,000 notes will continue to be legal tender. A similar withdrawal of notes from circulation was undertaken in 2013-2014.
- The central bank has advised the public to deposit ₹2,000 notes into their bank accounts and/or exchange them into banknotes of other denominations at any branch till September 30, 2023.
- The Rs 2000 banknote will continue to maintain its legal tender status.
- Limitation on exchange: one can exchange Rs 2000 banknotes up to a limit of Rs 20,000 at a time.
Reason behind RBI’S decision:
- The 2,000 denomination banknote was introduced in November 2016 primarily to meet the currency requirements of the economy in an expeditious manner after the withdrawal of legal tender status of all 500 and 1,000 banknotes in circulation at that time. With the fulfilment of that objective, and once notes of other denominations were available in adequate quantities, the printing of Rs 2000 notes was stopped in 2018-19.
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seeks to give the public good-quality currency notes and coins with better security features, while soiled notes are withdrawn out of circulation.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 They have only been withdrawn from circulation in conformity with the standard international practice of not having notes of multiple series in circulation at the same time.
Current value of Rs 2000 notes in circulation
- About 89% of the Rs 2000 denomination banknotes were issued prior to March 2017, and are at the end of their estimated 4-5-year lifespan. The total value of these banknotes in circulation has declined from Rs 6.73 lakh crore at its peak as on March 31, 2018 (37.3% of notes in circulation) to Rs 3.62 lakh crore, constituting only 10.8% of notes in circulation on March 31, 2023.