The RBI has recently issued an advisory to banks, to stop issuing 2000 Rs Notes, as it moves to take these notes out of circulation. 2000 Rs will continue to be accepted as legal tender, and can be exchanged at banks.
Background Information
Image Source: Business Today
The RBI (Reserve Bank of India) had introduced new 2000 Rs and 500 Rs notes during the demonetisation policy in 2016. These notes replaced the earlier 500- and 1000-rupee notes. The move was done to curb the use of black money in India, which was being used for crime and terrorism.
Supporters of the move claimed that it reduced black money usage in India and that it was a necessary step. Critics argued that it was done hastily without planning and did not achieve its desired goals. Demonetization did affect the economy, slowing down GDP growth for the quarter.
Only seven years after its introduction, the 2000 rupee is being withdrawn from circulation.
RBI Announcement
On Friday, May 19, the RBI announced that they have told all banks to stop issuing 2000 Rs notes and are moving towards taking out 2000 Rs notes from the market. 2000-Rs notes, however, will still be considered legal tender, even beyond the deadline for exchange.
The RBI asked people to exchange their notes at RBI regional offices and banks from May 23, i.e. Tuesday. At any one time, notes worth Rs 20,000 can be exchanged. The deadline for exchanging these notes has been set to 30 September, however this can be extended if the need arises.
The reasons given were the rise in digital payments in India as well as the availability of lower denomination notes in the market. The RBI stated that this is part of their clean note policy to ensure that only high-quality notes are in circulation.
The RBI believes the objective of the 2000-rupee notes has been achieved and that they have gone through their life span of 4-5 years. The last 2000-Rs note was printed in 2018–2019.
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Reactions and Responses
BJP leader Sushil Kumar Modi said that the move is the second surgical strike on black money and that it will not trouble the common man.
Former RBI Deputy Governor Gandhi said that it will help reduce black money and prevent hoarding of notes.
Opposition parties slammed the decision, and veteran Congress leader and former Finance Minister P Chidambaram said on Twitter –
“As expected, the government/RBI have withdrawn the Rs 2000 note and given time until September 30 to exchange the notes. The Rs 2000 note is hardly a popular medium of exchange. We said this in November 2016 and we have been proved correct. The Rs 2000 note was a band-aid to cover up the foolish decision of demonetising Rs 500 and Rs 1000 notes which were popular and widely exchanged currencies. A few weeks after Demonetisation, the government/RBI were forced to re-introduce the Rs 500 note. I shall not be surprised if the government/RBI re-introduced the Rs 1000 note as well. Demonetisation has come full circle!”
AAP leader Saurabh Bhardwaj said that the constant starting and stopping of the circulation of notes was affecting the economy.
AAP leader and CM of Delhi Arvind Kejriwal said on Twitter – “First said that by bringing 2000 notes, corruption will stop. Now they are saying that by banning 2000 notes, corruption will end.That’s why we say, the PM should be educated. Anyone can say anything to an illiterate PM. He doesn’t understand. The public has to suffer.”
Image Source: Screenshot From Twitter
Many opposition leaders believe that the withdrawal of the 2000 rupee note is an admission of the failure of the 2016 demonetization policy. Supporters argue that it is a routine process and will help reduce the hoarding of black money.
Conclusion
The RBI’s announcement was met with both support and criticism among people on the internet. However, it seems the effect of this decision will be far less than the 2016 demonetization policy, as the 2000 Rs notes only make up 11% of the notes in circulation.