Rs 2,000 note withdrawal part of PM's planEx-principal secy who oversaw demonetisation

By Akshay DongareAlmost seven years after it was introduced, the Reserve Bank of India (RBI) decided to withdraw Rs 2,000 denomination banknotes from circulation and said that all the notes must be exchanged before September 30. The Rs 2,000 notes were introduced after the demonetisation of Rs 500 and Rs 1,000 notes.

Nripendra Misra, who was the principal secretary to Prime Minister Narendra Modi and oversaw the demonetisation in 2016, spoke to India Today to give insights on how the move was decided well in advance and the Rs 2,000 denomination note was always meant to be a temporary solution.

He said, ‘When the demonetisation was planned, one thing that was very clear in the PM’s mind was that the Rs 2,000 note was going to be a temporary solution. It was an expected decision. PM Modi had a vision of slowly discontinuing the Rs 2,000 note from circulation.”

On Friday evening, the RBI announced the withdrawal of the notes, calling it a part of the “clean note policy”, which means that notes of the higher denomination have a shorter shelf life lasting just four-five years. Hence, it was inevitable that the notes would be phased out.

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“The decision to remove Rs 2,000 currency notes from the system was taken somewhere back in 2018. Gradually, the RBI withdrew 2,000 from circulation and since new notes were not getting printed, they naturally had to be withdrawn,” Nripendra Misra said.

On being asked whether the withdrawal was to curb black money, he said, “This is one purpose. Those who have black money, they stash it in high denominations. And this is one reason why it cannot last long in circulation. The introduction of Rs 2,000 note had only one purpose, which was to fill the gap of the sudden requirement for cash that developed after the demonetisation.”

RS 2,000 NOTES CAN BE EXCHANGED TILL SEPT 30, 2023

The central bank has asked citizens to exchange Rs 2,000 currency notes by September 30, 2023. All banks have been asked to provide deposit or exchange facilities for Rs 2,000 banknotes till September 30. However, the Rs 2,000 notes will remain legal tender.

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The central bank also said that in order to ensure operational convenience and to avoid disruption of regular activities of bank branches, the exchange of Rs 2,000 notes into notes of other denominations can be made upto a limit of Rs 20,000 at a time at any branch starting from May 23.

HERE’S WHAT THE RBI HAS SAID

The Rs 2,000 denomination currency note was introduced in November 2016 following the demonetisation of Rs 1,000 and the old Rs 500 banknotes. According to the RBI, the objective of introducing the Rs 2,000 banknotes was met once currency in other denominations became available in adequate quantities. As such, the printing of Rs 2,000 banknotes was stopped in 2018-19.

Explaining the move, the RBI said, “About 89% of the Rs 2000 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 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. 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 Rs 2000 denomination banknotes from circulation,” the circular read.

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