By Prabhjot Singh | Opinion |
Indian households are once again in panic. The reason is the Rs 2,000 currency note, which always remained suspect.
Not many can still put behind those agonising moments they had standing in long queues outside banks to get their legal tenders of 1000 and 500 changed in November 2016. That was the first devastating demonetisation blow that had left crores of households “crippled”.
The saving grace this time has been that the RBI has made public in advance its intention to pull back Rs 2000 currency notes from public circulation.
How successful or effective was the November 2016 demonetisation remains a subject of animated discussion even after more than six years.
The Reserve Bank of India has now notified – today on May 19 – to withdraw Rs 2000 currency notes from circulation. However, the banknotes in ₹2,000 denomination will continue to be a legal tender for next four and a half months.
For members of the Indian Diaspora who have in their saving or otherwise personal possession Rs 2000 currency notes need to act fast as the RBI deadline of September 30 may not be extended this time.
Interestingly, long before today’s announcement, many traders and even banks, often exhibited reluctance to accept Rs 2000 currency notes as fears of it being withdrawn suddenly lurked high.
Unlike the November 2016 shock demonetisation when old ₹500 and ₹1,000 notes were invalidated overnight, the ₹2,000 notes will continue to be a legal tender till September 30.
The RBI added that members of the public may deposit ₹2000 banknotes into their bank accounts. They can also exchange them into banknotes of other denominations at any bank branch. Deposit into bank accounts can be made in the usual manner, that is, without restrictions and subject to extant instructions and other applicable statutory provisions.
Exchange facility for the ₹2,000 notes up to ₹20,000 at a time would be available from May 23, and will continue till September 30, the central bank said.
The RBI has advised banks to stop issuing ₹2000 denomination banknotes with immediate effect.
Like the 2016 demonetisation move, it comes amid concerns of the highest denomination notes being used to hoard black money. The RBI had stopped printing ₹2,000 notes in 2018-19 and the notes were rarely in circulation.
The ₹2,000 denomination bank note was introduced in November 2016, primarily to meet the currency requirement of the economy in an expeditious manner after the withdrawal of legal tender status of all Rs 500 and Rs 1,000 bank notes in circulation at that time.
The RBI said it has also observed that ₹2,000 denomination note is not commonly used for transactions. Further, the stock of bank notes in other denominations continues to be adequate to meet the currency requirement of the public, it added.
“In view of the above, and in pursuance of the ‘Clean Note Policy’ of the Reserve Bank of India, it has been decided to withdraw the ₹2,000 denomination bank notes from circulation,” the RBI said.
“Members of the public are encouraged to utilise the time up to September 30, 2023 to deposit and/or exchange the Rs 2,000 bank notes,” a statement by the RBI said.
Deposit into bank accounts can be made in the usual manner, that is, without restrictions and subject to extant instructions and other applicable statutory provisions, it said.
“In order to ensure operational convenience and to avoid disruption of regular activities of bank branches, exchange of Rs 2,000 bank notes into bank notes of other denominations can be made up to a limit of Rs 20,000 at a time at any bank starting from May 23, 2023,” the RBI said.
To complete the exercise in a time-bound manner and to provide adequate time to the members of public, the RBI has asked all banks to provide deposit and exchange facility for Rs 2,000 bank notes until September 30, 2023.
As per the RBI, about 89% of the ₹2,000 denomination banknotes were issued prior to March 2017 and are at the end of their estimated life span of 4-5 years.
The total value of such banknotes in circulation has declined from ₹6.73 lakh crore at its peak as on March 31, 2018 (37.3% of notes in circulation) to ₹3.62 lakh crore constituting only 10.8%% of notes in circulation as on March 31, 2023.
In January 2014, the RBI announced withdrawal from circulation of all bank notes issued prior to 2005. Old notes may be collectors’ pride but can put the holder in trouble as their possession beyond a limit is “illegal” under the law.
(Prabhjot Singh is a veteran journalist with over three decades of experience of 14 years with Reuters News and 30 years with The Tribune Group, covering a wide spectrum of subjects and stories. He has covered Punjab and Sikh affairs for more than three decades besides covering seven Olympics and several major sporting events and hosting TV shows.)
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