Rs 2,000 Withdrawal: Don’t Panic, Majority in Rural India May Not Even Have A Single Bank Note, Say Officials

The Rs 2,000 banknote will remain legal tender even after September 30 this year and government officials feel that a majority of common people, especially in rural areas, may not have even a single Rs 2,000 banknote with them at present.

Advising against any panic, an official said the government did not anticipate wide ramifications of the Rs 2,000 note withdrawal decision, as it feels most people, especially in rural India, have been mostly dealing with the Rs 500, Rs 200 or Rs 100 notes. Most people may not have even a single Rs 2,000 note. “This is also thanks to the arrival of digital payments and especially UPI in the past six years, which means that many common people may not have even a single Rs 2,000 note at home,” an official said.

Given an over four-month window, there is no urgency to exchange or deposit a Rs 2,000 note at the bank if even one has them, the government official explained.

This decision may be discreetly aimed at the super-rich who may have hoarded the Rs 2,000 notes in black money and will now have to declare them. In the recent Income Tax (I-T), Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) raids in various parts of the country, huge stacks of Rs 2,000 notes were recovered. This may have acted as an input for the decision.

The Reserve Bank of India (RBI) said that the total value of Rs 2,000 banknotes in circulation stands at Rs 3.62 lakh crore as on March 31, 2023, constituting only 10.8% of the notes in circulation. “It has also been observed that this denomination is not commonly used for transactions,” the RBI said.

The decision also comes ahead of the general elections in the country, which are less than a year away.

The one concern, however, is that common people will from right now stop accepting Rs 2,000 notes so people, even if they have one or two Rs 2,000 notes in urban centres, will have to rush to the banks to exchange, fearing liquidity concerns. Sources are hence clarifying that the Rs 2,000 note will continue to be legal tender even after September 30, 2023.

The RBI has said that the exchange of Rs 2,000 banknotes into banknotes of other denominations can be made up to a limit of Rs 20,000 at a time at any bank starting from May 23. “Members of the public are encouraged to utilise the time up to September 30, 2023 to deposit and/or exchange Rs 2000 banknotes,” the RBI said.