RBI Withdraws Rs.2000 currency notes from circulation|2000 Rupee Note BAN|Demonetization Of 2000 Rupees: Impacts

RBI Withdraws Rs.2000 currency notes from circulation

2000 Rupee Note BAN | RBI Withdraws Rs.2000 currency notes from circulation but still it will remain legal tender. RBI instructed the citizens to deposit or exchange these notes by September 30, 2023 from Banks. in this article we will UNDERSTAND ABOUT THIS highest denomination currency Rs.2000 note from circulation. How does this impact on us and Economy.

2000 Rupee Note BAN|Demonetization Of 2000 Rupees:- Impacts

What is it? What are the impacts on us? How does this Impact on us?

While understanding this ban we have to first understand its background;

what is happening with the 2000-rupee note in India?
We are aware of the 2000-rupee note was introduced in 2016, as 500 and 1000-rupee notes were being demonetized suddenly. And as a result, Indian government has decided to ban 2000-rupee notes on 19th May 2023

Now, RBI has a “Clean note policy”, as per policy torn and soiled notes should be removed from circulation and should be replaced with fresh notes. So according to this policy, since most of the 2000-rupee notes have already been in circulation for 4-5 years and are no longer needed, the RBI has decided to remove them from circulation. Individuals holding these notes can exchange them at banks until September 30th.

Is it a demonetization?

The answer in No, on the basis of following reasons;

  • The purpose of the demonetization in 2016 was to remove black money from the economy. To introduce Rs.2000 notes in market is itself an operational decision, where the 2000-rupee notes have served their purpose and are now being discontinued.
  • RBI has further confirmed that the note is still valid as legal tender. That denotes it will still legally be accepted everywhere. RBI has given instructions banks to stop circulating it (Rather the printing these notes in 2018-19 anyway had been stopped by RBI).
    However, the duration for which they will remain legal tender has not been specified. This lack of clarity might result in people being hesitant to accept 2000-rupee notes, making it necessary to exchange them at banks or designated RBI offices.
    Because of this there may be a possibility that people may not accept the 2000-rupee notes. But don’t panic, if you have them, in all probability, you’ll have to get it exchanged at the bank only (or certain designated RBI offices)

So, if you have Rs.2000 note what can you do now?

Well, if you have a few 2000-rupee notes, you can:

  • Get it exchanged it from any bank branch – Note that the maximum limit for exchange is Rs. 20,000
  • Deposit it in your bank account – There’s no specific limit on deposits – it is up to on the limit of your account as per your KYC
  • Exchange at BC outlets – RBI designated Business Correspondent agent of the bank can also get your notes exchanged.  There is the maximum limit here of Rs. 4,000

How does this impact on us?

Now, let’s explore the impact of this ban

There will not be significant impacts on individuals like us, the reasons I tell you why:

  • Out of total currency in circulation the 2000-rupee notes are just 10.8% as in 2016, total 86% of the currency in circulation was 500 and 1000-rupee notes formed because of that the impact this time will be fairly low
  • We still have much time to get this exchange done by 30th September. Also RBI has ensured that till then, these notes are legally valid to avoid the rush at last moment.

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But how does this impact the economy?

However, answer to this question can lead to a couple of interesting outcomes:

  • Many peoples who are having black money will rush to utilize this cash mainly towards buying assets like gold and real estate. Due to this we may see spike in the prices for gold and real estate in the near future. This price surge, though, is likely to be limited to certain areas and localized.
  • As RBI has assigned the maximum limit of exchange through bank deposit is Rs.20000, so most of people may prefer to deposit the money in their bank account instead of exchanging it.
  • Now, the total value of the 2000-rupee notes in circulation is 3.26 lakh crores, and if we estimate 50% of this to be deposited (just a guesstimate), that would mean an infusion of 1.61 lakh crores into banks. This additional money which banks will get as an additional capital and might use this money could prompt banks to offer loans at lower interest rates, similar to what happened during the 2016 demonetization. However, given the smaller scale and lower impact, we cannot be certain about this outcome.


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