Reserve Bank of India Governor Shaktikanta Das expects most ₹2,000 bank notes to come back to the Central Bank. In an interaction, the RBI Governor indicated that any decision on the legal status would be taken upon the return of the currency.
The RBI had, last Friday, announced the withdrawal of the ₹2,000 denomination banknotes from circulation.
“My advise is to please see it as part of the Reserve Bank’s currency management operations. That is the primary purpose. Questions have been raised about the logic behind the September 30 deadline for withdrawal. Unless you give a specific time, unless you specify a particular time, the process will not achieve a state of finality. You have to give time so that the announcement is taken with seriousness,” Das said.
About 89 per cent of the ₹2,000 denomination banknotes were issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years.
The total value of these banknotes in circulation has declined from ₹6.73-lakh crore at its peak as on March 31, 2018 (37.3 per cent of notes in circulation), to ₹3.62-lakh crore, constituting only 10.8 per cent of the notes in circulation on March 31, 2023.
“We expect most of the notes to come back, that is our expectation at this stage. We will see how many notes come back as we approach the 30th... we will decide at that stage and the legal tender character, we have said that it continues. We have not said that this will happen or that will happen,” he said.
He also assured that the Central Bank is sensitive to Indians living abroad or who have gone on a foreign trip, elderly people visiting their children in the US or other countries for six months and Indian youngsters with H1 visas working in the US and other places.
“Whatever difficulties or whatever representations we come across, it will be our endeavour to address the difficulties of the people and to complete the entire process in a smooth manner,” he said.
Das does not foresee any problems in terms of notes supply. “We have more than adequate quantities of printed notes already available in the system, not just with RBI but with currency chests operated by the banks. There is no reason for worry. We have sufficient stocks, no need to worry,” he said
He emphasised that Indian currency management system is very robust and that the exchange rate has remained stable despite crisis in financial markets due to war in Ukraine and failure of certain banks in the West.
The impact of the withdrawal on the economy will be “very very marginal”, he added, saying ₹2,000 currency notes make up for just 10.8 per cent of the total currency in circulation.
He said ₹2,000 notes were introduced primarily to replenish the currency that was withdrawn following 2016 demonetisation. Also, it is similar to 2014 exercise, when RBI said it will completely withdraw from circulation all banknotes issued prior to 2005.
While the withdrawn ₹2,000 notes can either be deposited in bank accounts or exchange for other currency, banks have been advised to make necessary arrangements for exchange, he said.
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