It's been exactly one week since India's central bank, i.e., the Reserve Bank of India (RBI), announced the decision to draw curtains on the pink currency notes.??
Last Friday, the?RBI?said that the Rs?2,000 currency notes are being withdrawn from circulation, giving four months¡¯ time (till September 30th) for the public to exchange or deposit the Rs 2,000 notes in bank branches or at designated RBI offices.
After this announcement on May 19th, social media was abuzz with speculations about the nature of this move, with many?comparing it with the 2016 mega demonetisation announcement and calling this decision demonetisation 2.0 too.
However, it is fundamentally wrong to compare the withdrawal of Rs 2,000 notes with?2016¡¯s demonetisation move. Why, you may ask? Well, there are not one but multiple reasons that clarify why the recent move of removing the highest currency notes from circulation is?not the same as demonetisation?move of 2016.
Demonetisation move typically involves declaring a currency invalid, like what happened in 2016 to the old Rs 1000 and Rs 500 notes overnight and even in the prior demonetisation moves done by the RBI.?
But unlike those moves, the Rs 2000 note withdrawal has not involved the declaration of Rs 2,000 notes as invalid by the RBI. The RBI has clearly said that these Rs 2000 notes will remain legal tender, implying that they can be used in transactions as a valid currency denomination.
Unlike the overnight ban on Rs 1000 and Rs 500 notes in 2016's demonetisation, there is no reason to panic for honest citizens with legit sources for the Rs 2,000 notes.
With four months to go until the September 30 deadline arrives,?there is enough time and facilities offered by the RBI for the public to deposit or exchange Rs 2000 notes?in bank branches or authorised RBI centers. Customers can exchange Rs 2,000 notes worth Rs 20,000 per day, which has already been allowed since Tuesday.
Unlike the Rs 500 and Rs 1,000 notes in circulation, which occupied about 86% of the total notes in circulation, the Rs 2,000 notes constitute only about 10% of the total currency in circulation at this point.?
In other words, common people will logically have much smaller quantities of these notes, especially when compared to 2016's demonetisation move. Hence, the kind of panic that was visible during the note ban is unlikely this time around, as it was in the previous few days.
Amid concerns over the withdrawal of the Rs 2,000 notes, the?RBI?governor had also said the decision would have a "very marginal impact" on the economy as the share of Rs 2,000 notes was just over 10% of the notes in circulation and they were not used extensively in transactions. He had also denied any proposal to bring back Rs. 1000 notes.
According to?RBI data, as per the Moneycontrol report, the total value of Rs 2,000 notes in circulation has declined to 10.8% of the total as of March 31, 2023. To be more precise, the total value of these banknotes in circulation has declined from Rs 6.73 lakh crore at its peak on March 31, 2018 (37.3 percent of notes in circulation) to Rs 3.62 lakh crore, constituting only 10.8% of notes in circulation on March 31, 2023.
Also Read:?From Mangoes To Gold - Indians Find Unique Ways To Spend Rs 2000 Notes
Last but not least, the withdrawal of Rs. 2000 notes cannot be seen as a sudden or unexpected move.?Unlike the sudden ban on Rs 1000 and Rs 500 notes in 2016, which caused a lot of panic and was not expected, the withdrawal of Rs 2,000 notes wasn¡¯t unexpected.
In the last few years, the RBI has been bringing down the printing of Rs 2,000 notes. According to RBI data, as mentioned in the report, RBI had reduced the volume (number of pieces) of Rs 2000 notes from around 274 crore, or 2.4 percent, of the total currency in circulation in March 2020 to 214 crore, or 1.6 percent, at the end of March 2022.
The RBI? stopped printing Rs 2000 notes in 2019.
In value terms as well, the Rs 2,000 notes have fallen from around 37.3 per cent of the total value of currency notes in circulation as on March, 2018 to 10.8 per cent as on March, 2023. In that sense, the direction or approach towards the Rs 2,000 bills was clear over the last few years. Even if RBI didn't announce the withdrawal of Rs 2,000 notes now, these notes would have gone out of circulation over the next few years going by the trend of decline in previous years. Hence, this shouldn¡¯t come as a surprise to anyone.
Moreover, while announcing the Rs 2000 note withdrawal decision last week, the RBI had clearly mentioned that the purpose of Rs 2000 notes was accomplished. "The Rs 2,000 was introduced with the primary purpose of quickly replenishing the value of money that was being taken out of the system via demonetisation", RBI governor Shaktikanta Das had said. "As that purpose has been fulfilled, and there are enough notes of other denominations now, the decision was taken to withdraw these notes."
Also Read;?Did You Know About India's Rs 10,000 Rupee?Note
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