Economy
Note withdrawal is part of currency management: Das
Summary
- Move is part of RBI’s Clean Note Policy as these notes were printed five or six years ago
NEW DELHI : A day before banks open their counters for exchanges and deposits of ₹2,000 notes, Reserve Bank of India Governor Shaktikanta Das said the move is part of the central bank’s currency management operations. All measures have been taken to ensure that people are not inconvenienced while exchanging these notes, he added. “Let me re-emphasize that it (currency withdrawal) is part of the currency management operations of the RBI," Das told reporters on the sidelines of an RBI event in Delhi.
Late on Friday, the central bank said the ₹2,000 notes issued in the wake of demonetization are being withdrawn, and people can exchange or deposit them at bank branches till 30 September. The currency note remains legal tender, according to RBI.
He said the note withdrawal was not unprecedented as, according to Section 27 of the RBI Act, the central bank is required not to issue notes which are excessively soiled or damaged, and it withdraws such notes and issues fresh ones from time to time. This exercise was also undertaken in 2013-14 as well when notes printed prior to 2005 were withdrawn from circulation, and the public was advised to come to banks and exchange. “So, this time, we are therefore withdrawing ₹2,000 notes from circulation, but they continue as legal tender. We had clearly explained in our press note that these ₹2,000 notes were primarily issued for the purpose of quickly replenishing the value of money which was being taken out from the system in November 2016 when the prevailing legal tender status of ₹1,000 and ₹500 notes were withdrawn," Das said.
He added that the ₹2,000 notes were introduced in 2016 with the specific purpose of putting back that much value into the system, and a decision was taken to adopt high-value currency as it could quickly replenish the currency withdrawn from circulation. “The November 2016 measure, which was undertaken by the government at that time, that purpose has been fulfilled. Today, there are enough notes in the circulation of other denominations; even the circulation of ₹2,000 notes, as we have explained, has come down from a peak of ₹673,000 crore to about ₹362,000 crore. So, it has come down by more than 50%," Das said. “The printing of ₹2,000 notes has been stopped as it has also completed its life cycle because all these notes were printed about four or five years ago. So, in this background, as a part of our Clean Note policy, it has been withdrawn," the RBI governor said.
Asked about the 30 September deadline for the withdrawal, Das said time was given to take the process to the stage of finality so that people take the announcement seriously and come forward to exchange notes.
The exchange process starts on Tuesday. RBI has said that a person can exchange ₹20,000 worth of ₹2,000 notes at any bank branch at a time without having to provide any credentials.
Das said that banks had been advised to make necessary arrangements to make the exchange process smooth. “I do not expect the kind of a rush in the bank branches," Das said while making an appeal that there was no reason to rush to the bank to complete the exchange as a suitable time is available to complete the process. To another question on the status of ₹2,000 notes after 30 September, when the exchange process would end, Das said the RBI expects most of the notes to return to the central bank within the given timelines.
