Rs.2000 Becoming History

Rs.2000 Becoming History

Dr. Abdul Azeez N.P.

India's highest denomination Rs 2,000 notes, are also becoming history. Rs. 2,000 notes were in circulation for seven years. We cannot forget Prime Minister Narendra Modi's demonetisation announcement in November 2016 and the days and nights that followed. About 86 per cent of the currency in circulation was invalidated that day. The important objectives of demonetisation were fighting against black money, eliminating counterfeit notes, creating a cashless economy through digital transactions, curbing the financing of terrorists and terrorists and eradicating anti-national activities. But time has proved that the government has failed to achieve all these goals. We have seen that many transactions, sectors and the public who depended only on money have become victims of this move.

After demonetisation, our banking systems found it very difficult to bring money back into circulation. The Rs 2000 currency notes were issued under Section 24(1) of the RBI Act, 1934, as an easy way out by the RBI to increase the circulation of notes in the economy. But it was only later that it began to be felt that printing such high-value currencies was absolutely foolish. Even then, many questioned the rationale behind demonetisation, introducing high-value Rs 2000 notes as a move to eradicate corruption, black money and fake currencies. In general, the circulation of high denomination notes increases the chances of counterfeiting; not only that, but it also makes it easier and cheaper to make fake currencies. As such, it would significantly increase inflationary risks and facilitate tax evasion and illegal activities.

But as notes in circulation increased and a sufficient quantity of notes of other denominations were available, RBI stopped printing Rs 2000 notes from 2018-19. At the end of March 2017, the share of Rs 2000 notes in the total value of notes in circulation was 50.2 per cent. But later, it decreased to 37.3 per cent in the next year, 31.2 per cent in 2019, 22.6 per cent in 2020, 17.3 per cent in 2021, 13.8 per cent in 2022, and 10.8 per cent in 2023. These notes, which were 3.3 per cent of the total number of printed currency notes in 2017, now account for just one per cent. Most of the Rs 2000 notes were issued before March 2017. But these notes were later withdrawn from the market more or less phased. Even the ATMs did not come out with Rs 2000 notes. Many rumours and misinformation about the demonetisation of these notes were doing the rounds on social media. There were reports of many small businesses and traders advising their cashiers not to accept these notes from customers.

Another is RBI's finding that Rs 2000 notes are not popular and such notes are not commonly used for transactions. Also, the availability of small amounts of notes in denominations of Rs 100 and Rs 500 in sufficient quantity in the country also led to its withdrawal. Moreover, in the last 6-7 years, digital transactions and e-commerce have also increased significantly. Therefore, many people have warned that these notes may be withdrawn from circulation. The withdrawal of Rs 2000 notes is not expected to cause as much disruption as compared to the demonetisation of 86 per cent of India's currency in circulation six years ago. This is because only 10.8 per cent of the currencies in circulation are of Rs 2,000 notes. However, 2000 will result in a marked decline in the overall money supply in India, which is still dependent on cash.

Another major reason could be that Rs 2000 notes have become synonymous with counterfeit currency. The main objective of demonetisation was to eliminate fake notes from the economy. When the Rs 2000 note was introduced after demonetisation, the RBI assured the citizens that it was as safe as possible. Interestingly, even baseless rumours have been making the rounds on social media claiming that Nano-GPS chips have been installed to ensure security. But immediately after the release of these notes, fake currencies were seized in large quantities from different parts of the country. Incredibly, the reality is that these new notes are so good that you cannot tell if they are genuine or fake.

According to the National Crime Records Bureau (NCRB) report on fake Indian currency notes, fake Indian currency notes worth Rs 15.1 crore were seized in 2016, Rs 28.1 crore in 2017, Rs 17.95 crore in 2018 and Rs 25.39 crore in 2019. But it is going to reach a record of 92.17 crores in 2020 alone. 190.5 per cent increase compared to Adhawa 2019. However, in 2021, it has come down to 20.39 crores. The fact is that most of these seized fake currencies are Rs 2000 notes. According to NCRB data, in 2017, Rs 2,000 notes accounted for 53.3 per cent of the total value of counterfeit currency seized by law enforcers. In 2018, it was 61.01%, 71.3% in 2019, 53.1% in 2020 and 60% in 2021. Similarly, RBI's annual report also points to similar trends. According to this, 17,929 fake notes of Rs 2,000 were found in the financial year 2017-18. The next year, it rose to 21,847 fake notes. However, with the withdrawal of these notes, the number of fake Rs 2000 notes has reduced and instead, fake Rs 500 notes have become available. It is a sad fact that fake Rs 2000 notes were available in the market immediately after the announcement of demonetisation. In the first 53 days, law enforcers seized 2,272 fake Rs 2,000 notes worth Rs 45.44 lakh across India. Fifty-seven per cent of this was found in Gujarat.

Given the size of our economy, the number of fake currencies may not have much impact on the economy, but if counterfeit notes circulate in the country, it will destroy people's faith in the currency. When the government prints new notes, it brings new security measures, but the fact is that the people who print fake currencies are also getting smarter. In many cases, counterfeit currency rackets print currencies using genuine, high-quality paper. What is very worrisome is that these rackets are also bought from the same dealers where the government buys the paper needed to print the notes.

With the current Rs 2000 currency returning to the bank, the question of what to replace it has started to arise from many quarters. There is also a lot of hype going on about the return of old Rs 1000 notes. But RBI has not released any official information regarding this.

Finally, one has to wonder whether politics is behind the new demonetisation. There is no doubt that the Karnataka election results have scared the BJP. It must be remembered that the withdrawal is months before crucial assembly elections in five states and the national elections next year. It should be remembered that the credibility of the Indian rupee is being undermined through such politics.