88% Of Rs 2,000 Notes Back In Banks, Currency Worth Rs 42,000 Crore still In Circulation, Says RBI

The Reserve Bank of India (RBI), on August 1, 2023, announced the status of the Rs. 2,000 notes in circulation as on July 31, 2023.

According to a press release by the RBI, 88 per cent of the notes which were in circulation as on May 19, 2023, have come back to the banks. The banks have reported to have received 3.14 lakh crore notes, till July 31. Now, only notes worth Rs. 42,000 crore in denomination of Rs. 2,000 are in circulation.

According to the release, out of the total notes received until the last day of July, approximately 87 per cent came from cash deposits in banks, and the rest from exchanges with notes of other denomination.

When RBI issued the notification to withdraw the Rs 2,000 denomination notes from circulation on May 19, 2023, it gave people two options. They could either deposit the notes in their banks for which there was no limit, and the other option was to exchange the notes with the banknotes of other denominations.

Data shows that most people preferred to deposit cash in their banks rather than exchange it. The reason could also be that there was a limit to the amount (Rs. 20,000) that could be exchanged at a time.

RBI said in its notification: “Members of the public are requested to utilise the next two months to deposit and/or exchange the Rs. 2,000 banknotes held with them to avoid any rush in the last few days before September 30, 2023.”

The central bank has given ample time to people to deposit their banknotes and has asked the banks to provide support to seniors in this regard.

REASONS FOR WITHDRAWAL FROM CIRCULATION

RBI introduced the Rs 2,000 denomination notes in November 2016 to meet the currency requirement at the time of demonetisation, when the government decided to withdraw notes of Rs. 1,000 and Rs 500 denomination from circulation. However, when the new notes of Rs. 500 denomination were introduced, the printing of the Rs. 2,000 notes were stopped in 2018-19.

According to RBI, most of the Rs 2,000 banknotes were issued before March 2017. These notes have a lifespan of around 4-5 years and are at the end of it now. So, under the clean note policy, lesser use of this high denomination banknote by the public in their transactions, and considering that the currency requirement can be fulfilled with other denomination bank notes, RBI decided to withdraw Rs 2,000 note from circulation.

The decline in circulation of Rs 2,000 banknotes can also be seen from the data available. These Rs 2,000 banknotes, which were 6.73 lakh crore in circulation as of March 31, 2018, declined to 3.62 lakh crore as of March 31, 2023.

In the last month’s status report, 76 per cent of the Rs 2,000 banknotes were returned, which were 2.72 lakh crore up to June 30, 2023, while 84,000 crore notes remained in circulation.