After being in circulation for nearly seven years, the Rs 2,000 notes are about to become obsolete as the deadline for their exchange and deposit expires today. Passing the torch to Rs 500 notes as the highest denomination currency, these notes will be remembered for having the shortest lifespan in currency history.
“Their (Rs 2,000 notes) lifespan was relatively short because they served the purpose for which they were introduced. These notes filled the void created by the withdrawal of Rs 500 and Rs 1,000 notes and met the demand for high denomination currency,” explained R Gandhi, former Deputy Governor of the Reserve Bank of India (RBI).
The Rs 2,000 notes were introduced in 2016 to address the currency shortfall after the government’s decision to withdraw Rs 500 and Rs 1,000 notes.
According to the RBI’s statement issued on September 1, as much as 93 percent of the Rs 2,000 currency notes that were in circulation on May 19, the day when the currency was withdrawn from circulation, had been returned to banks.
In addition to their brief existence, Rs 2,000 notes were also seldom seen in daily transactions, raising concerns of hoarding for illicit purposes.
While Rs 2,000 notes will no longer be accepted for transactions from Sunday onwards, they will remain legal tender even after September 30. However, the Reserve Bank of India (RBI) is expected to make an announcement soon regarding the status of legal tender.
“Now that the majority of the currency has returned to the banks, the next logical step for the central bank is to remove the legal tender status of Rs 2,000 notes,” added Gandhi. He sees no need to introduce new higher denomination notes since digital payment methods are effective and secure. With the significant increase in digital payments in urban and rural areas, there is no demand for higher denomination notes.
Another significant question is whether the deadline for exchanging and depositing notes will be extended. Experts do not anticipate a blanket extension announcement from the central bank.
“Instead of announcing a universal extension, the RBI may adopt a selective approach if necessary. For instance, the central bank might offer some relief for NRIs,” explained an executive director of a public sector bank. After September 30, individuals can only exchange remaining notes at RBI regional offices.
