The Reserve Bank of India on Monday announced that as much as 76 per cent of the Rs 2,000 currency notes in circulation have either been deposited or exchanged at banks, even as around three months remain for the September 30 deadline to turn in the remaining notes before they become illegal tender.
The Reserve Bank of India’s May 19 announcement that Rs 2,000 banknotes would be withdrawn from circulation, coming just over seven-and-a-half years since the economically deleterious demonetisation of Rs 500 and Rs 1,000 notes, revived the echoes of the November 8, 2016 decree. However, there were two things different this time around. One, these notes will continue to remain legal tender.
And two, people were allowed a four-month window ending on September 30 to either deposit or exchange the Rs 2,000 note. In November 2016, the decision to abruptly and completely rescind the legal tender status of the then available high value currency notes was ostensibly aimed at combatting black money and terror financing, the RBI in May had said the latest move is in pursuance of its Clean Note Policy and does not alter the legal tender status of the withdrawn notes.
The May 2023 decision reinforced the view that the introduction of the Rs 2000 note directly contradicted the claims made at the time by the government that demonetisation of Rs 500 and Rs 1,000 notes was a well thought out, effective and permanent strike against black money.
The RBI said that the printing of new Rs 2,000 notes was stopped in 2018-19 and that about 89% of the Rs 2,000 notes were issued between November 2016 and March 2017 “to meet the currency requirement of the economy in an expeditious manner” following demonetisation and that since then lower denominations had become adequately available, obviating the need for the Rs 2,000 notes.
While many favoured the move, many others are heavy on criticism, holding that the political economy of the Modi government – and its institutional functioning –is lacking in the term that the government seems to hardly have any cohesion or clarity in its macroeconomic or fiscal vision. While the jury is still out on whether the May 2023 move was a well-thought out move, it is heartening and relieving to note that the transition this time has remained smooth.
As per RBI, in value terms, Rs 2,000 notes in circulation has come down to Rs 84,000 crore as on June 30 from Rs 3.56 lakh crore on the day of announcement of withdrawal on May 19. As much as 87 per cent of the notes returned have been deposited in bank accounts by public while the remaining 13 per cent were exchanged by them in other denominations.
The total value of Rs 2,000 banknotes in circulation, which amounted to Rs 3.62 lakh crore as on March 31, 2023, had declined to Rs 3.56 lakh crore as at the close of business on May 19, 2023. There are still three months to go, if you are in possession of any Rs 2,000 notes, even as it is hoped that the RBI clarifies what would be the status of Rs 2,000 notes in private hands after September 30.
