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Business News/ News / India/  Why you should not compare 2000 banknotes withdrawal to demonetisation?

2000 banknotes withdrawal news: The Reserve Bank of India (RBI) has decided to take 2,000 banknotes out of circulation. In a surprise move on Friday, the central bank announced the withdrawal of 2,000 currency notes from circulation but gave the public time till September to either deposit such notes in accounts or exchange them at banks. This comes seven years after the notes were introduced in 2016 following the demonetisation move. 

Withdrawal of 2000 currency notes is different from 2016 demonetisation

However, the current development is quite different from the 2016 episode for several reasons. In November 2016, the old 500 and 1,000 notes were invalidated overnight, the 2,000 notes will continue to be legal tender till September 30.

Vinit Khandare, CEO and Founder, MyFundBazaar said in contrast to demonetisation, when 500 and 1,000 notes, making up over 86% of the money in circulation, were invalid, neither the RBI nor the government had done so this time around for 2,000 notes.

These bills can still be used in transactions because the Reserve Bank of India has said plainly that they would continue to be considered legal money, he added.

The 2,000 notes make up just a relatively modest part of the total money in circulation at this time, in contrast to the 500 and 1,000 notes.

This is not the first time, the RBI has taken notes out of circulation. “There has already been a similar exercise, as the RBI announced in 2013–14 that beginning in March 2014, it would remove entirely from circulation all banknotes printed before 2005," Khandare said.

As part of its clean note policy, the RBI occasionally performs such an exercise.

Meanwhile, people may approach bank branches to deposit or exchange their 2000 banknotes held by them

“Members of the public may approach bank branches for deposit and/or exchange of 2000 banknotes held by them. The facility for deposit into accounts and exchange for Rs2000 banknotes will be available at all banks until September 30, 2023. The facility for exchange will be available also at the 19 Regional Offices (ROs) of RBI having Issue Departments1 until September 30, 2023," RBI said. 

Limit on deposit of Rs2000 banknotes into a bank account

Deposit into bank accounts can be made without restrictions subject to compliance with extant Know Your Customer (KYC) norms and other applicable statutory/regulatory requirements.

“With a view to minimise inconvenience to the public, to ensure operational convenience and avoid disruption of the regular activities of bank branches, all banks may exchange 2000 banknotes up to a limit of 20,000/- at a time," the central bank said in its notification.



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Sangeeta Ojha
A business media enthusiast. Writes on personal finance, business and banking.
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Updated: 22 May 2023, 07:07 AM IST
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