?2000 Notes To Be Withdrawn By RBI, Deadline Set To Sep 30

The Reserve Bank of India (RBI) recently announced the withdrawal of the Rs 2,000 currency note from circulation. The RBI has extended the deadline for depositing or exchanging existing Rs 2,000 notes in banks until September 30 with a limit of Rs 20,000 at a time, even though the note will still be considered legal tender. The public has been left with many unanswered questions in response to this decision.?

During the demonetization process in November 2016 when the Rs 500 and Rs 1,000 notes were taken out of circulation, the Rs 2,000 note was introduced. Its main goal was to supply the economy with the short-term currency needs it had. But as time went on, it became clear that few people actually used the Rs. 2,000 note for transactions. Furthermore, the RBI discovered that a sizable portion of the notes were unusable and dirty. So, it was decided to take the notes down.

Reasons for Withdrawal

1. Soiled Notes:Many Rs 2,000 notes had deteriorated, raising questions about how usable they were. The RBI wants to preserve the quality and reliability of the money in circulation by removing these notes from circulation.

2. Limited Usage: For everyday transactions, the Rs 2,000 note never really took off. People tended to prefer smaller denominations due to its large denomination making it less convenient for everyday purchases. The demand for the Rs. 2,000 note gradually decreased as other currency notes were readily available in sufficient quantities.

3. Life Cycle and Replacement: The RBI estimates that 89% of the Rs 2,000 notes were printed before March 2017 and have now reached the end of their four to five year estimated useful life. In order to maintain a supply of usable banknotes in circulation, the RBI aims to replace these old notes with brand-new money.

4. Currency Composition:At its peak, only a small portion (10–11%) of all notes in circulation were Rs 2,000 notes. The Rs 500 and Rs 1,000 notes, on the other hand, made up the vast majority (80%) of the total amount of currency in circulation during the demonetization in 2016. This demonstrates how the two scenarios are different in terms of importance and application.

Implementation and Impact

The RBI has given banks until September 30, 2023 to deposit or exchange Rs 2,000 notes in order to ensure a smooth transition. For this purpose, people can go to their banks or the regional offices of the RBI. The RBI has also given banks the go-ahead to stop issuing notes worth Rs. 2,000 immediately.

On daily transactions or the economy, the withdrawal of the Rs. 2,000 note is not anticipated to have a significant effect. The supply of notes in other denominations is still enough to meet the public's needs for currency. Additionally, the RBI did not act alone in deciding to withdraw the note suggests that other relevant authorities, including the Finance Ministry, were consulted.

Facility for Deposit and Exchange:

The facility for the public to deposit and/or exchange Rs. 2000 banknotes will be open until September 30, 2023, according to the RBI. As a result, people can either deposit these banknotes into their bank accounts or trade them in for bills of a lower denomination or other forms of legal tender.

Deposit in bank accounts:

In accordance with KYC guidelines and other relevant statutory requirements, people may deposit 2000 rupee banknotes into their accounts with any bank in the usual way, without any restrictions. Additionally, where necessary, banks abide by the Cash Transaction Reporting (CTR) and Suspicious Transaction Reporting (STR) requirements.

Exchange through bank branches:

All banks are required to make it possible to exchange Rs. 2000 banknotes for notes of lower denominations through their branches. Banks are permitted to exchange these banknotes up to a maximum of 20,000 at a time in order to ensure operational convenience and prevent disruption of typical banking activities. As a result, people are only permitted to exchange a total of 20,000 in Rs. 2000 notes at once.

Business correspondents:

With a daily cap of 4,000, Business Correspondents (BCs) may also be permitted to exchange 2000 banknotes for account holders. To facilitate this service, banks may decide to increase the cash holding limits of BCs. These BCs are crucial in providing banking services to rural and unbanked areas.

Mobile Vans to remote areas:

To ensure a smooth transition, people are asked to go to their banks or branches starting on May 23, 2023, to take utilise the exchange facility. Banknotes worth 2000 may continue to be deposited as usual. The RBI requested banks to consider using mobile vans to offer deposit and exchange services in remote or unbanked areas.

Special Arrangements for Convenience:

Banks are required to make special accommodations to ensure that senior citizens, people with disabilities, and women who want to exchange or deposit 2000 rupee notes experience the least amount of inconvenience possible. These precautions might include special lines, priority services, and any assistance that is required.

Jan Dhan Yojana and BSBD Accounts:

The usual restrictions still apply when crediting the value of 2000 banknotes to Jan Dhan Yojana Accounts or Basic Savings Bank Deposit (BSBD) Accounts. This is to guarantee that the current rules and restrictions for these particular accounts remain in effect.

FAQ's

1. Why are ?2000 denomination banknotes being withdrawn?

The 2000 denomination banknote was introduced in November 2016 under Section 24(1) of the RBI Act, 1934, primarily with the goal of meeting the economy's currency requirements in a timely manner following the withdrawal of the legal tender status of all 500 and 1000 banknotes in circulation at the time. With the achievement of that goal and the availability of banknotes in other denominations in sufficient quantities, printing of 2000 banknotes was halted in 2018-19. The majority of the 2000 denomination notes were issued prior to March 2017 and have reached the end of their 4-5 year estimated life-span. As, this denomination is also not commonly used for transactions, according to observations. Furthermore, the stock of banknotes in other denominations remains sufficient to meet the public's currency needs.

2. What is Clean Note Policy?

It is a policy adopted by RBI to ensure availability of good quality banknotes to the public.

3. Does the legal tender status of ?2000 banknotes remain?

Yes. The ?2000 banknote will continue to maintain its legal tender status.

4. Can ?2000 banknotes be used for normal transactions?

Yes. The general public can continue to use 2000 banknotes in their transactions and accept them as payment. They are, however, advised to deposit and/or exchange these banknotes by September 30, 2023.

5. What should the public do with the ?2000 denomination banknotes held by them?

Public can approach bank branches to deposit and/or exchange their 2000 banknotes.

Depositing money into accounts and exchanging it for 2000 banknotes will be possible at all banks until September 30, 2023. The exchange facility will also be available at the RBI's 19 Regional Offices (ROs) with Issue Departments until September 30, 2023.

6. Is there a limit on deposit of ?2000 banknotes into a bank account?

Deposits into bank accounts are permitted without restriction, subject to compliance with existing KYC norms and other applicable statutory / regulatory requirements.

7. Is there an operational limit on the amount of ?2000 banknotes that can be exchanged?

Public can exchange ?2000 banknotes upto to a limit of ?20,000/- at a time.

8. Can ?2000 banknotes be exchanged through Business Correspondents (BCs)?

Yes, exchange of ?2000 banknotes can be made through BCs upto a limit of ?4000/- per day for an individual account holder.

9. From which date will the exchange facility be available?

To give time to the banks to make necessary arrangements, Public are requested to approach the bank branches or ROs of RBI from May 23, 2023 for availing exchange facility.

10. Is it necessary to be a customer of the bank to exchange ?2000 banknotes from its branches?

No. A non-account holder also can exchange ?2000 banknotes up to a limit of ?20,000/- at a time at any bank branch.

11. What if someone needs more than ?20,000/- cash for business or other purposes?

There are no restrictions on deposits into accounts. The 2000 banknotes can be deposited into bank accounts, and cash withdrawals can be made against these deposits.

12. Is there any fee to be paid for the exchange facility?

No. The exchange facility will be provided free of cost.

13. Will there be special arrangements for senior citizens, persons with disabilities, etc. for exchange and deposit?

Banks have been instructed by the RBI to make arrangements to reduce inconvenience to senior citizens, persons with disabilities, etc., seeking to exchange/deposit ?2000 banknotes.

14. What will happen if one cannot deposit / exchange ?2000 banknote immediately?

A time limit of more than four months has been provided for the deposit and/or exchange of Rs. 2000 banknotes in order to make the process simple and convenient for the public. Public are encouraged to use this facility whenever it is convenient within the allotted time.

15. What will happen if a bank refuses to exchange / accept deposit of ?2000 banknote?

In the case of poor service, the complainant or aggrieved customer should first contact the relevant bank for redress of grievance. if the bank does not respond within 30 days of receiving the complaint or if the complainant is dissatisfied with the response or resolution provided by the bank. The complaint can be filed under the Reserve Bank - Integrated Ombudsman Scheme (RB-IOS), 2021, at the Complaint Management System portal of RBI (cms.rbi.org.in),?

Conclusion

The RBI's withdrawal of the Rs. 2,000 note represents a routine action taken to maintain the effectiveness and quality of currency circulation in India. The RBI has chosen to phase out the Rs 2,000 note gradually due to worries about the usability of soiled notes and the low level of popularity of the denomination. The RBI wants to guarantee a smooth transition without creating excessive disruptions, so it has given depositors and exchangers plenty of time to deposit or exchange these notes.

As the Indian economy evolves, it is critical to adapt the currency landscape to meet the public's changing needs and preferences. The withdrawal of the Rs. 2,000 note is a step in this direction, allowing the circulation of more convenient currency notes for everyday transactions.

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