RBI withdraws Rs 2,000 notes from circulation, exchange till Sept 30.

According to media reports, the central bank has instructed banks to offer deposit and exchange services for Rs 2,000 notes until September 30, 2023. The notes will remain legal tender, and holders can deposit them into their bank accounts or exchange them for other denominations.

The withdrawal is due to the declining circulation of these notes, constituting only 10.8% of the total as of March 31, 2023. The Rs 2,000 notes were introduced in 2016 but printing was stopped in 2018-19. The details regarding ID requirements for currency exchange are yet to be clarified.

Starting from May 23, 2023, individuals can deposit or exchange their Rs 2,000 banknotes at any bank branch. The RBI has set a maximum exchange limit of Rs 20,000 at a time to ensure smooth operations and avoid disruption in bank branches, according to the circular.

The total value of these banknotes in circulation declined from Rs 6.73 lakh crore at its peak as on March 31, 2018 (37.3% of Notes in Circulation) to Rs 3.62 lakh crore constituting only 10.8% of Notes in Circulation on March 31, 2023.

In March, FM Sitharaman clarified that banks have not been instructed to refrain from filling ATMs with Rs 2,000 notes. The decision to stock ATMs with specific denominations is made by banks based on factors such as past usage, consumer demand, and seasonal trends.

The Rs 2,000 banknote was introduced in November 2016 to quickly fulfill the currency needs of the economy following the withdrawal of Rs 500 and Rs 1,000 notes as legal tender. However, once an adequate quantity of banknotes in other denominations became available, the printing of Rs 2,000 notes was discontinued in 2018-19, as stated in the circular.

According to Rachit Sharma, DGM at Taxmann, the RBI has chosen to discontinue Rs. 2,000 banknotes due to their approaching end of life span and their representation of only 10.8% of the total notes in circulation as of March 31, 2023. The Rs. 2,000 currency note will continue to be accepted as legal tender until September 30. It remains unclear whether the Bank will require Aadhaar and PAN details for currency exchange transactions.