Rs 2,000 note withdrawal: Not the first time RBI has withdrawn currency from circulation

The Reserve Bank of India announced that 2,000-rupee banknotes will be withdrawn from circulation. The currency note currently makes up about 10.8% of all currency in use. However, this is not the first time RBI has withdrawn notes. The central bank had taken a similar decision in the year 2013-14.

What happened in 2013-14?  

The Reserve Bank of India announced in 2014 that all notes issued prior to 2005 would be taken out of circulation. According to sources, the pre-2005 series of currency has seen the greatest amount of counterfeiting. The 2014 decision was to curb the counterfeiting of currency notes, the 2023 decision is taken in view of RBI's "Clean Note Policy."

Why is RBI withdrawing Rs 2,000 currency notes

The RBI has decided to withdraw Rs 2,000 notes in pursuance of the clean notes policy of the Reserve Bank of India. 

“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 ₹2000 denomination banknotes from circulation.” RBI stated.

While the Rs 2,000 note is also not frequently used in transactions, the central bank has stated that banknotes with a face value of 2,000 rupees will still be accepted as legal tender.

With "immediate effect," the RBI stated that it had instructed banks to stop issuing 2,000-rupee notes.

The Central Bank, however, stated that individuals can go to bank offices to deposit or exchange any 2,000-rupee banknote they may have. The use of this facility is permitted through September 30, 2023.

The RBI in its Press release said, “The ₹2000 denomination banknote was introduced in November 2016 under Section 24(1) of RBI Act, 1934, primarily to meet the currency requirement of the economy in an expeditious manner after the withdrawal of legal tender status of all ₹500 and ₹1000 banknotes in circulation at that time. The objective of introducing ₹2000 banknotes was met once banknotes in other denominations became available in adequate quantities. Therefore, printing of ₹2000 banknotes was stopped in 2018-19.”

“About 89% of the ₹2000 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 these 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 on March 31, 2023. It has also been observed that this denomination is not commonly used for transactions. Further, the stock of banknotes in other denominations continues to be adequate to meet the currency requirement of the public.” the central bank added.