DeMo Redux: RBI to Withdraw Rs 2,000 Notes; Exchange Allowed Till Sept 30; Rs 20,000 Limit at a Time

Mumbai: In a surprise move, the Reserve Bank on Friday announced withdrawal of Rs 2,000 currency notes from circulation but gave public time till September 30 to either deposit such notes in accounts or exchange them at banks.

Unlike the November 2016 shock demonetisation when old Rs 500 and Rs 1,000 notes were invalidated overnight, the Rs 2,000 notes will continue to be a legal tender till September 30.

In a statement, the Reserve Bank of India (RBI) said it has asked banks to stop issuing Rs 2,000 notes with immediate effect.

While the RBI did not specify a limit for depositing the Rs 2,000 currency notes in bank accounts, exchange of a maximum of Rs 20,000 (10 notes of Rs 2,000) for other currency notes will be allowed at a time.

The move comes amid concerns of the highest denomination notes being used to hoard black money. The RBI had stopped printing Rs 2,000 notes in 2018-19 and the notes were rarely in circulation.

The RBI said it has also been observed that Rs 2,000 denomination note is not commonly used for transactions. Further, the stock of bank notes in other denominations continues to be adequate to meet the currency requirement of the public, it added.

"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 2,000 denomination bank notes from

The bank notes in Rs 2,000 denomination will continue to be a legal tender, it added.

The central bank has asked the public to deposit Rs 2,000 bank notes into their bank accounts and/or exchange them into banknotes of other denominations at any bank branch.

"Members of the public are encouraged to utilise the time up to September 30, 2023 to deposit and/or exchange the Rs 2,000 bank notes," the central bank said.

Deposit into bank accounts can be made in the usual manner, that is, without restrictions and subject to extant instructions and other applicable statutory provisions, it said.

"In order to ensure operational convenience and to avoid disruption of regular activities of bank branches, exchange of Rs 2,000 bank notes into bank notes of other denominations can be made up to a limit of Rs 20,000 at a time at any bank starting from May 23, 2023," the RBI said.

To complete the exercise in a time-bound manner and to provide adequate time to the members of public, the RBI has asked all banks to provide deposit and/or exchange facility for Rs 2,000 bank notes until September 30, 2023.

Also, the facility for exchange of Rs 2,000 bank notes up to the limit of Rs 20,000 at a time shall also be provided at the 19 Regional Offices (ROs) of RBI having Issue Departments from May 23, 2023.

As per the RBI, about 89% of the Rs 2,000 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 such banknotes in circulation has declined from Rs 6.73 lakh crore at its peak as on March 31, 2018 (37.3 per cent of notes in circulation) to Rs 3.62 lakh crore constituting only 10.8 per cent of notes in circulation as on March 31, 2023.

In January 2014, the RBI announced withdrawal from circulation all bank notes issued prior to 2005.

Congress targets PM Modi Over Withdrawal

The Congress targeted the Prime Minister on Friday over the RBI announcement on the withdrawal of Rs 2,000 currency notes from circulation, saying the move was "typical of our self-styled vishwaguru" and his method of "first act, second think".

A party MP said it was the beginning of a second demonetisation "disaster", in an apparent reference to the demonetisation exercise of November 8, 2016 when the legal tender status of all Rs 500 and Rs 1,000 bank notes was withdrawn by the Narendra Modi government.

"Typical of our self-styled Vishwaguru. First Act, Second Think (FAST). 2000 rupee notes introduced with such fanfare after that singularly disastrous 'Tughlaqi firman' of Nov 8 2016 are now being withdrawn," Congress general secretary Jairam Ramesh said on Twitter, targeting the prime minister.

Congress MP Manickam Tagore tweeted, "Second Demo disaster starts .. M = Madness."