Journey of Rs. 2000 note 2016-23

?Rs. 2000 note was launched as a #denomination of currency in India by the Reserve Bank of India (RBI) on #November 8, 2016, as a part of the government's #demonetization initiative. The currency was the highest denomination in #circulation at its introduction, surpassing the previous highest denomination of Rs. 1000, and was #discontinued in 2016.

However, since its introduction, there have been #reports of difficulties in conducting #transactions with the Rs. 2000 note due to its high denomination because the availability of smaller #denomination notes was limited, thus causing #inconvenience for day-to-day transactions. As a result, the circulation and usage of the Rs. 2000 #note decreased over time.

No New Notes

The Reserve Bank of India had in 2019 stated that 3,542.991 #million notes of Rs. 2,000 were printed during the #financial year 2016-17. However, in 2017-18, only 111.507 million notes were #printed, which further reduced to 46.690 million notes in the year 2018-19. No new Rs 2,000 #currency notes have been printed since April 2019.

As of #February 26, 2021, 2,499 million Rs 2,000 notes were circulated, constituting 2.01 percent and 17.78 percent of #banknotes in volume and value, respectively.?

The #government decides the printing of banknotes of a particular denomination in consultation with the RBI to #maintain the desired denomination mix for facilitating the #transactional demand of the public. During 2019-20 and 2020-21, no indent has been placed with the #presses to print Rs 2000 denomination banknotes.

Reasons

1. When 2000-rupee notes were #introduced in 2016, they were intended to replenish the Indian #economy’s currency in circulation quickly after demonetization.
2. The Central Bank has #frequently said it wants to reduce high-value notes in #circulation and has stopped printing 2000-rupee #notes over the past four years.
3. According to the #RBI, this denomination is not commonly used for #transactions.

Although the #government and the Central bank did not specify the reason for the timing of the move, #analysts point out that it comes ahead of state and general #elections in the country, when #cash usage typically spikes.

Impact on Banking and Economy

The government’s call to #deposit or exchange the notes for denominations by #Sept. 30 will likely lead to a rise in bank #deposits. Additionally, since all the Rs. 2000 notes will come back into the #banking system, this may reduce cash circulation, which may help #improve liquidity in the banking system. Importantly, this comes when #deposit growth is lagging behind bank credit #growth.

The impact on the #economy will be limited. Legitimate transitions have always been going through and will continue to go because a considerable portion of the system's #cash is unaffected.

Conclusion

The #withdrawal of the Rs. 2000 Bank Note from the #market is a significant step taken by the #Government to address issues related to #black money, counterfeit currency, and promoting a #digital economy. While the move may have specific implications and #inconveniences for the public, it aims to create a more #transparent and accountable financial #system.