Around 35% of Rs 2,000 currency notes deposited or exchanged so far

The withdrawal of Rs 2,000 banknotes, which started from May 23, gathered pace with around 35 per cent of such notes being either deposited or exchanged thus far, top central banking sources told Business Standard.

There were 1.81 billion pieces of Rs 2,000 banknotes in circulation as on March 31, comprising 1.3 per cent of total circulation in volume terms.

The Reserve Bank of India (RBI) stopped printing the Rs 2,000 denomination in 2018-19. The total value of these banknotes in circulation declined from Rs 6.73 trillion at their peak on March 31, 2018 (37.3 per cent of notes in circulation) to Rs 3.62 trillion, constituting only 10.8 per cent of notes in circulation on March 31.

Gujarat, Punjab, and New Delhi saw the most return of the Rs 2,000 denomination. Sources said around 80 per cent of the notes returned so far have been deposited; the rest exchanged. Last month, State Bank of India Chairman Dinesh Kumar Khara said the bank received Rs 17,000 crore worth of Rs 2,000 denomination, of which Rs 14,000 crore had been deposited. 

Even though the decision to scrap the highest denomination currency note from circulation was reminiscent of the demonetisation exercise in 2016 when 86 per cent of the currency in circulation was invalidated overnight to remove the scourge of black money, the mood this time around has been different.

No long queues and no panicking customers were observed as banks started exchanging the Rs 2,000 notes. It is, as RBI Governor Shaktikanta Das said according to the central bank’s analysis, ‘less disruptive’, given a lower value of notes had been withdrawn over a longer period of time.

He said there was no reason for citizens to throng bank branches, given they had time until September 30 to deposit or exchange their notes. The Rs 2,000 note was introduced in 2016 to quickly replenish the amount of currency in circulation after the old Rs 500 and Rs 1,000 denominations lost their legal tender status.
 

On May 19, the RBI announced the withdrawal of the 2,000 denomination from circulation, citing a ‘clean note policy’ and its limited use in cash transactions. Moreover, the denomination had an estimated lifespan of four/five years and had served its need.

The withdrawal process, which started on May 23, will continue until September 30, 2023. The Rs 2,000 note continues to be legal tender until then.

Following withdrawal of the Rs 2,000 note, liquidity in the banking system surged, further spurred by an increase in government expenditure. On Monday and Tuesday, the liquidity surplus in the banking system — measured by the number of funds parked by banks with the RBI — was over Rs 2 trillion.

Out of favour

• Around 80% of the notes returned have been deposited; the rest exchanged
• Gujarat, Punjab, and Delhi among centres that have seen most returns of Rs 2,000 notes
• As of March 31, 2023, there were 1.81 billion pieces of Rs 2,000 notes in circulation, just 1.3% of total in volume terms
• In value terms, these notes made up 10.8% of the currency in circulation
• RBI stopped the printing of Rs 2,000 notes in 2018-19