Rs 2000 notes withdrawn by the RBI: What should you do?

On Friday, May 19, 2023, India's central bank and regulatory body, the Reserve Bank of India (RBI), decided to withdraw ₹2000 currency notes from circulation. If this brought back memories of the earlier note ban, don’t worry. This time the government is giving ample time to deposit the notes with the bank. Read on to know more about this latest RBI directive and what you should do with these high denomination notes.

The announcement was made in pursuance of RBI's 'Clean Note Policy'. The deadline to deposit this high denomination currency note in the banks is by 30th September 2023. However, the Rs 2000 notes shall remain legal tender even after the deadline.

Why the RBI Decided to withdraw ₹2000 Note from circulation?

To understand the reasons behind the regulatory body's decision to discontinue ₹2000 from circulation, it is essential to know why it was introduced in the first place.

On 8th November 2016, the Indian government announced the demonetisation of the then existing ₹500 and ₹1000 notes. The purpose behind demonetisation was to get the economy rid of black money, corruption, tax evasion and other related illegal activities and encourage a shift towards digital transactions.

The ₹2000 note was introduced to meet the economy's currency requirements swiftly and efficiently. The ₹2000 currency note was introduced in November 2016 under Section 24(1) of the RBI Act, 1934.

Reasons for withdrawal of ₹2000 currency notes

• When the objective of sufficient money circulation in the economy was achieved, printing ₹2000 banknotes was stopped in 2018-19.
• The availability of other denomination banknotes continues to be adequate to meet the currency requirement of the public.
• Due to the recent surge in digitisation, this high-value currency has seen reduced transactions.
• Additionally, the RBI explained this move by stating, "About 89% of the ₹2000 denomination banknotes were issued prior to March 2017 and are at the end of their estimated life span of 4-5 years."
• Because of the above reasons, and to achieve the 'Clean Note Policy', that is, the availability of good quality currency notes, the RBI decided to withdraw the ₹2000 notes from circulation.

How to exchange ₹2000 note?

Are you wondering what you can do with ₹2000 notes and why there's no need to panic? Here are a few points to keep in mind.

• Firstly, to ensure that the complete exercise is followed swiftly and in the designated time, adequate time has been given to the public to follow the directives. Accordingly, the circulation of these notes will discontinue only after 30th September 2023.
• Meanwhile, you can continue to use ₹2000 notes for transactions and receive them in payment. However, ensure that the deposit is done before the deadline.
• To exchange ₹2000 banknotes, you may approach any bank before 30th September 2023, regardless of whether you hold an account with the bank.
• The deposit of ₹2000 notes can be made in the usual manner without restrictions and subject to compliance with extant Know Your Customer (KYC) norms and other applicable Statutory requirements. You can encash them later against these deposits.
• The currency exchange facility will also be available at the 19 RBI Regional Offices (ROs) that have Issue Departments. Click here to go to FAQs on the website.

What is the ₹2000 note exchange limit?

To ensure the smooth operation and functioning of the banks, minimum inconvenience to the public, and no disruption to other banking activities; a specific limit has been set for ₹2000 note exchange.

In its circular, the RBI announced that the exchange of ₹2000 notes into other denomination banknotes could be made up to a limit of ₹20,000/- at a time at any bank. This facility shall begin on 23rd May 2023 and will be free of cost.

As mentioned earlier, there is no limit for a deposit of ₹2000 notes subject to the KYC and other regulatory requirements.

Conclusion

As a responsible citizen of the country, it would be wise to follow the RBI's guidelines and deposit or exchange ₹2000 notes by 30th September 2023. You can go through the FAQs released by the RBI for further clarification.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision