‘No longer preferred’: MoS Finance on why ₹2,000 notes were withdrawn

The finance ministry has said that ₹2,000 denomination banknotes are no longer preferred for transactions, which is one of the reasons these banknotes were withdrawn from circulation.

Replying to a question in the Lok Sabha, minister of state in the finance ministry Pankaj Chaudhary says the stock of banknotes in other denominations continues to be adequate to meet the currency requirement of the country. "In view of above and in pursuance of RBI’s “Clean Note Policy”, Reserve Bank of India decided to withdraw the ₹2000 banknotes from circulation.”

Chaudhary says the ₹2,000 banknotes were introduced on November 10, 2016, to “expeditiously meet the currency requirement of the economy" post-withdrawal of the legal tender status of all ₹500 and ₹1000 banknotes in circulation at that time.

"RBI has conveyed that about 89% of ₹2000 denomination notes were issued prior to March 2017 and are close to the end of their useful life which spans from 4-5 years. According to the pan India survey of the public conducted by RBI, ₹2000 denomination banknotes are no longer preferred for transactions," the minister says.

The RBI's annual report for 2016-17 says the total expenditure incurred on security printing stood at ₹7,965 crore for the year July 2016 to June 2017. "The value of ₹2000 banknotes in circulation is ₹0.84 lakh crore and the percentage of ₹2,000 in total banknotes in circulation is 2.51%. State/UT wise information on deposit of ₹2,000 banknote is not being compiled by RBI."

The minister says the withdrawal was a currency management operation planned to avoid any "inconvenience to the public or any disruption" in the economy. "Further, withdrawal of ₹2000 banknotes has been factored in, in the current year’s requirement, and sufficient buffer stock of banknotes in other denominations is being maintained across the country to meet exchange/withdrawal requirements."

On whether there is a shortage of circulation of lower notes like ₹ 50, 20, and 10 resulting in inconvenience to people, the minister clarified the currency in denominations of ₹10 and ₹20 is available either in the form of banknotes or coins. "As regards currency in the denomination of ₹50, an adequate quantity of banknotes are available for the use of the members of the public".

This comes days after RBI governor Shaktikanta Das said that ₹2000 currency notes worth ₹2.72 lakh crore – or about 76% of the total value of such notes in circulation – have come back to the banking system by July 3, 2023. The value of ₹2000 banknotes in circulation stood at ₹3.62 lakh crore as on March 31, 2023.

On May 19, the banking regulator withdrew ₹2000 denomination notes from circulation. Even as ₹2000 denomination notes continue to be legal tender, the central bank urged members of the public to deposit such notes into their bank accounts or exchange them into banknotes of other denominations at any bank branch. These notes can be exchanged into other denominations up to a limit of ₹20,000 at a time at any bank.

The exercise to exchange or deposit ₹2000 currency notes began on May 23 and will go on till September 30, 2023.