On June 25th, RBI governor Shaktikanta Das claimed that more than 2/3rd of Rs 2000 notes have been returned to the banking system. This claim came as a surprise as the policy was only announced 1 month prior (on May 19th). Currently, the Rs 2000 notes circulating in the market value are around Rs 3.62 lakh.
The deposit of this 2/3rd amount calculates to Rs. 2.41 lakh crore out of the total pool of Rs. 3.62 lakh crore according to the data on March 31, 2024. Further to ease the panic, the RBI governor explained that People do not need to rush to claim their money because the deadline is not inflexible. He further exclaimed that the recall will not affect monetary stability, but the RBI declined to comment on a recent analyst report that suggested the action would increase consumer spending, which has been under pressure for some time and would, in turn, help support the economy and grow above the projected 6.5 per cent.
In addition to this, he clarified that it is not clear what would be the fate of these notes after September 30th. He exclaimed that there is no plan right now to revoke the legal tender status of these notes after the deadline of September 30
Background –
On May 19th, the RBI under its “Clean Note Policy” called for the withdrawal of Rs. 2000 notes from circulation. This immediate action was called for the reason that their objective has been fulfilled. The people would be given ample time to convert their legitimate holdings into small denominations.
Explaining the reason behind such a measure, RBI said that the anticipated life of 4-5 years has come to an end for about 89% of the banknotes in the denomination of 2000, which were printed before March 2017. As of March 31, 2018, there were 6.73 lakh crore worth of these banknotes in circulation, which made up 37.3% of all notes in circulation. By March 31, 2024, that number had dropped to 3.62 lakh crore or 10.8% of all notes in circulation. Additionally, it has been noted that this denomination is not frequently used in transactions. Additionally, there are still enough banknotes in various denominations on hand to satisfy the public’s need for currency.
These notes were introduced under section 24(1) of the Reserve Bank of India Act, 1934 to meet the requirement created after the withdrawal of Rs. 500 and Rs. 1000 banknotes from the legal tender. In a previous press conference organized on June 8th, the RBI governor exclaimed that under the monetary policy review, we have found that more than 1.8 lakh crore notes have been returned decreasing the circulation by approximately 50%.
Instruction Issued –
The instruction for the exchange of Rs. 2000 banknotes as legal tender will be continued until September 30, 2024. The public can utilize the period until September to deposit the denomination of the said amount either in their bank accounts or exchange them at any bank branch. And further to facilitate convenience, the exchange of the denomination can be made up to Rs. 20000 at a single time.
This facility will also be available at the 19 regional offices of RBI having issue departments. Further, the banks are also advised not to issue 2000 denominations from hereinafter. In case of any doubt, the public can refer to the FAQ on the RBI Website.
