The Central Bank of India has instructed every bank to stop immediately issuing banknotes with a value of Rs 2,000. The Rs. 2,000 currency will however continue to be accepted as payment even after its withdrawal date. In 2018–19 alone, printing of the Rs 2,000 banknote was discontinued.
The Reserve Bank of India stated on Friday that it would stop printing the Rs. 2,000 note and set a deadline of September 30 for citizens to deposit or swap whatever notes they may now have. Beginning on May 23, you can deposit money or swap money. For a several reasons, the government chose to discontinue the 2000-rupee notes. Firstly, the main goal of these currencies when they were first launched in 2016 was to immediately refill the rupees in existence following the decentralisation procedure.
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The RBI, however, has stated its goal of decreasing the amount of highly valuable notes in existence during the four prior years and is currently no longer issuing the 2000-rupee banknotes. In addition, the 2000-rupee value is not typically implemented for day-to-day transactions, according to the Central Bank of India (RBI). Given this, removing these notes is consistent with simplifying the monetary system and encouraging the use of denomination that are more often implemented.
Why RBI took this decision?
3.6 trillion rupees ($44.02 billion) is the worth of the 2000 banknotes now in use, however a portion of it will be kept in banks as savings. Based on how customers behave, Kotak Institutional Equities predicts the amount of liquidity might increase by about 1 trillion rupees, while QuantEco Research thinks that the potential effect on liquidity might vary from 400 billion to 1.1 trillion rupees. According to ICICI Securities Primary Dealership, the liquidity surplus could reach 1.5 to 2 trillion rupees. In May, the excess liquidity in the Indian banking industry exceeded 600 billion rupees on averaged.
According to Pranjul Bhandari, the top India analyst at HSBC, every year approximately 2.5 to 3 trillions rupees of liquidity from the financial services industry seeps out as money in existence. Commodities may so predict a little relief on the money supply issue as a result.
Most of the 2000banknotes—about 89 percent of them—were printed prior March 2017 & are now within four to five years of expiring. From a peak of 6.73 lakh crores as of March 31, 2018, which represented 37.3 percent of all banknotes in distribution, to a low of 3.62 lakh crore as of March 31, 2023, which represented just 10.8% of all notes in distribution, the overall amount of these currencies has considerably decreased. Furthermore, it has been noted that additional quantities of banknotes still have enough supply to suit the demands of the public for currency, although this particular denomination is not frequently utilised for payments.
“According to the provisions of the RBI’s clean note policy, harmed, fake, or filthy notesof any amount are eliminated from distribution and recently published banknotes remain available in the market, however this does not occur in the current situation; only the amount of Rs. 2000/- has been removed throughout a particular time frame and no additional similar note has been issued by the central bank to remain in circulation,” Gupta has additionally stated in the PIL.
According to the PIL, tiny businesses and shops have allegedly reportedly ceased to accept the Rs 2,000 note. The PIL claims that the Reserve Bank of India has not yet clarified what benefits the RBI or the economy as a whole will receive from the removal of the Rs 2000 notes from existence.The PIL says that the consumers’ severe poverty is widely recognised as evidenced by the demonetization of the Rs. 500 and 1,000 rupee banknotes in the year 2016.
