Changing of Rs 2,000 currency notes off to a slow yet smooth start

Banks continue to use discretion on filling up forms

The withdrawal of Rs 2,000 denomination bank notes, which started last week, went on smoothly as most bank branches and the Reserve Bank of India (RBI) regional offices saw lukewarm response in the first week.

According to central banking sources, most Rs 2,000 notes were deposited the first week, while only 20 per cent was exchanged.

Rural bank branches saw greater activity than urban areas, bankers said. There was no shortage of other denomination currencies in bank branches, and even if there was, it was replenished quickly, bankers said. “People who are hoarding those notes are still watching the process unfold. It has to be seen how things are managed once that money starts coming in,” said a banker.

Many banks are asking customers to fill up forms while exchanging or depositing notes, with the central bank allowing banks to use their discretion.

State Bank of India and some other public sector banks are not insisting on filing up of forms, though most private sector banks' customers have been asked to do so.

According to bankers, concern over investigative agencies enquiring over the process of exchange and deposits in future, made banks conduct the process in a transparent manner.

The RBI has mandated that banks are required to comply with cash transaction reporting (CTR) and suspicious transaction reporting (STR) requirements, where applicable. CTR is generated if cash deposit is more than Rs 10 lakh.

“Deposit and exchange of notes [any notes] were happening earlier also. What we have said is that banks can follow the same practice as they were doing so far,” said a top central bank source.

“The initial days were without any hiccups. There are no long queues in branches. The public knows that there is enough time to deposit or withdraw Rs 2,000 notes,” the source said.

RBI Governor Shaktikanta Das said according to the central bank’s analysis, the entire process is going to be non-disruptive. He said there was no reason for people to rush to bank branches as they will get four months to deposit or exchange the notes.

The Rs 2,000 note was introduced in 2016 after the legal tender status was withdrawn for the then Rs 500 notes and Rs 1,000 notes during the demonetisation exercise.

On May 19, the RBI announced withdrawal of Rs 2,000 note from circulation, citing clean note policy and lack of use. The withdrawal process which started from May 23, will continue till September 30, 2023. The Rs 2,000 note continues to be a legal tender.

From 50.2 per cent of the total value in circulation in March 2017, the share of Rs 2,000 notes fell to 10.8 per cent in March 2023. The total value of the Rs 2,000 notes in circulation dropped from Rs 6.73 trillion from March to Rs 3.62 trillion in March 2023. The RBI had said it has stopped printing the Rs 2,000 note in 2018-19.