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India Withdraws ₹2000 Banknotes from Circulation, Will Remain Legal Tender Till 30th September

The Reserve Bank of India (RBI) has announced the withdrawal of ₹2000 denomination banknotes from circulation, while reassuring the public that they will remain legal tender. This decision comes after the demonetisation of ₹1000 and ₹500 banknotes six-and-a-half years ago. Notably, the move follows the recent state assembly elections in Karnataka, won by the Congress party, and precedes upcoming state elections and the 2024 general elections.

Starting May 23, all bank branches will offer exchange services for ₹2000 banknotes into other denominations, up to a limit of ₹20,000 at a time. Deposits and exchanges for ₹2000 banknotes will be available at all banks until September 30, 2023.

The ₹2000 denomination banknotes were introduced after the government’s announcement on November 8, 2016, that ₹1000 and ₹500 notes (specified bank notes or SBNs) would be demonetised.

The government had previously stated that the demonetisation of specified bank notes (SBNs) was aimed at combating corruption, black money, and counterfeit currency.

The RBI has announced that individuals can deposit their ₹2000 banknotes into their bank accounts or exchange them for banknotes of other denominations at any bank branch. Deposits can be made in the usual manner without restrictions, subject to existing instructions and statutory provisions.

To avoid disruption of regular bank activities, the exchange of ₹2000 banknotes for other denominations will be limited to ₹20,000 at a time, starting from May 23, 2023. All banks will provide deposit and exchange facilities for ₹2000 banknotes until September 30, 2023, to ensure a timely completion of the exercise and provide adequate time for the public.

The RBI’s 19 Regional Offices (ROs) with Issue Departments will also offer exchange services for ₹2000 banknotes up to the limit of ₹20,000 at a time.

The central bank has advised banks to cease issuing ₹2000 denomination banknotes immediately. The public is urged to take advantage of the time until September 30, 2023, to deposit and/or exchange their ₹2000 banknotes, as stated in the announcement.

The RBI has stated that the objective of introducing ₹2000 banknotes has been achieved, as banknotes in other denominations are now available in sufficient quantities. As a result, the printing of ₹2000 banknotes was discontinued in 2018-19.

Approximately 89% of the ₹2000 denomination banknotes were issued before March 2017 and have reached the end of their estimated lifespan of 4-5 years. The total value of these banknotes in circulation has decreased from ₹6.73 lakh crore at its peak on March 31, 2018 (representing 37.3% of Notes in Circulation) to ₹3.62 lakh crore, constituting only 10.8% of Notes in Circulation on March 31, 2023.

The RBI has further noted that the ₹2000 denomination banknotes are not commonly used for transactions. Moreover, the stock of banknotes in other denominations is sufficient to meet the public’s currency requirements.

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