Is It Demonetisation 2.0? Here’s All You Need To Know About Withdrawal Of Rs 2,000 Notes
The Reserve Bank of India on Friday announced its decision to withdraw the Rs 2,000 notes from circulation, seven years after they were first introduced.
The Reserve Bank of India (RBI) clarified that the decision was taken under its ‘clean note policy’ and the note will remain legal tender.
It has also been informed that the public can exchange the Rs 2,000 notes into other notes or deposit them in banks within a specified time frame. Recalling that Rs 500 and Rs 1,000 notes were no longer in circulation due to demonetisation in 2016, people have many questions about this sudden move by RBI.
Here are answers to some frequently asked questions about the withdrawal of Rs 2,000 notes:
When can people exchange notes?
From May 23, notes can be exchanged at RBI’s 19 regional offices and other bank branches, the central bank said. People can convert the withdrawn currency into low denomination notes or directly deposit it into their bank account.
These notes can be exchanged or deposited till September 30, the central bank said.
To maintain operational convenience, notes worth Rs 20,000 can be exchanged at a time.
Why did RBI take this decision?
According to the central bank, these notes are not normally used for transactions.
The number of Rs 2,000 notes in circulation has declined from its peak of Rs 6.73 lakh crore in March 2018, when it was 37.3 per cent of notes in circulation, to Rs 3.62 lakh crore in March 2023, a mere 10.8 per cent. Notes in circulation.
89 per cent of the Rs 2,000 notes were issued before March 2017 and have completed their lifespan of 4-5 years, the central bank said in its report. RBI also said that other denominations of notes are sufficient to meet public demand.
How is it different from demonetisation in 2016?
Unlike demonetisation, which invalidated Rs 500 and Rs 1,000 notes, the current decision does not prevent the use of Rs 2,000 in transactions.
What do experts say about this move?
The move has received mixed reactions from many experts. NR Banumurthy, Vice-Chancellor, Dr PR Ambedkar School of Economics, said, “I think this decision was taken to increase circulation with low value. Expect the Rs 1000 note to make a comeback to speed up circulation.
Madan Sapnavis, Chief Economist, Bank of Baroda, does not believe the move will have a severe impact on MSMEs or the agriculture sector. He says, “Since most MSMEs work under the GST network, they don’t deal with the big Rs 2000 currency.”
However, the move will hamper MSMEs, small traders and farmers, said Arun Kumar, professor of the Institute of Social Sciences. “This decision will disrupt the economy especially for small traders, farmers and MSMEs. If this is done considering black money hoarding, I think the number of hoarders this time is very less. The intention of the government is still not clear,” he said.
While the 2016 demonetisation had a long-term impact on the Indian economy, the withdrawal of Rs 2,000 notes is unlikely to have such an impact. However, experts have cautioned that the impact of the move is better to wait and see as the mechanisms of the decision are not yet fully clear.