Phasing out ₹2000 notes: five things you need to know

New Delhi: The Reserve Bank of India (RBI) on Friday announced the gradual withdrawal of ₹2000 denomination notes from circulation saying that it has served its purpose. Mint takes a look at five key things you need to know:

Why ₹2000 currency notes are being phased out?

According to the RBI, these notes introduced in November 2016 meant to meet the currency requirement of the time in the context of the demonetisation of the ₹500 and ₹1000 notes in cirulation at that time, has served its purpose. Printing of new ₹2,000 note was stopped in FY19 and most of these notes are at the end of their life span. RBI's decision to withdraw these notes are in light of its 'clean note policy.' The central bank has also made it clear that the stock of banknotes in other denominations continue to be adequate to meet the currency requirement of the public.

Will the ₹2000 note remain as legal tender?

Yes. The these notes will continue to remain legal tender status but the RBI encourages the public to get these exchanged from banks by 30 September. People can continue to use these notes for purchases and also receive them in payment. All banks and 19 regional offices of the RBI will offer the facility for exchange starting 23 May, upto September end. It remains to be seen what decision the government takes about the notes after this time period by which time, most of these notes are expected to go out of circulation. The RBI has also asked banks to stop issuing ₹2000 denomination banknotes with immediate effect.

Is there any restriction on exchange of ₹2000 banknotes?

There is no restriction on exchange but procedures about customer due diligence and a limit of ₹20,000 for one time exchange will apply. If a person requires to exchange more than ₹20,000 in one go, it can be deposited in his bank account and the money can be withdrawn. There is no fee for the exchange.

Do you need a bank account for currency exchange?

No. A non-account holder also can exchange ₹2000 banknotes up to a limit of ₹20,000 at a time at any bank branch.

Is the phase out of ₹2000 note likely to cause any disruption?

Since the November 2016 demonetisation of high value currency, digital payments have gone up in India significantly and the extent of cash use has come down. As per official estimates, the total value of ₹2000 denomination banknotes in circulation has declined from ₹6.73 trillion at its peak as on 31 March 2018 accounting for 37.3% of the notes in circulation to ₹3.62 trillion constituting only 10.8% of the notes in circulation on 31 March 2023. RBI also says that this denomination is not commonly used for transactions.