The Reserve Bank of India (RBI) on Friday triggered a wave of reactions after it decided to withdraw Rs 2,000 notes from circulation. While the central bank emphasised that Rs 2,000 note will continue to be legal tender, it also clarified that the same is being withdrawn under the RBI’s ‘clean note policy.’
Soon after the ‘withdrawal of Rs 2,000 from circulation’ note announcement, people started raising several questions including – till when can one exchange Rs 2,000 notes?; Rs 2,000 note deposit limit?; Is Rs 2000 note banned in India?, and so on.
However, of all these, many also wondered what is the central bank’s clean note policy under which it has withdrawn Rs 2,000 notes from circulation? Interestingly, the RBI has provided clear directions on how, when and where people can deposit and exchange their Rs 2,000 notes. (Click on the link to read)
Rs 2,000 Note Withdrawn From Circulation – Explained
It must be noted that the Governor Shaktikanta Das-led RBI has merely withdrawn Rs 2,000 note from circulation and not demonetised it. As per the guidelines, the central bank is not even empowered to demonetise any currency notes.
Also Read | Why RBI’s Withdrawal Of Rs 2,000 Notes Is Different From 2016 Demonetisation
“About 89% of the ₹2000 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% of Notes in Circulation) to ₹3.62 lakh crore constituting only 10.8% of Notes in Circulation on March 31, 2023. It has also been observed that this denomination is not commonly used for transactions,” the RBI said in its official release.
However, clarifying that the Rs 2,000 note continues to be legal tender, the RBI also mentioned that anyone with these notes can start exchanging these from May 23, 2023 up to September 30, 2023.
It said, ".....exchange of ₹2000 banknotes into banknotes of other denominations can be made upto a limit of ₹20,000/- at a time at any bank starting from May 23, 2023. To complete the exercise in a time-bound manner and to provide adequate time to the members of public, all banks shall provide deposit and/or exchange facility for ₹2000 banknotes until September 30, 2023."
RBI’s Clean Note Policy – Explained
The withdrawal of Rs 2,000 notes has been done in pursuance of RBI’s ‘Clean Note Policy.’ The official circular read, “........in pursuance of the “Clean Note Policy” of the Reserve Bank of India, it has been decided to withdraw the ₹2000 denomination banknotes from circulation.”
As per the central bank, the ‘clean note policy’ is an initiative to ensure the circulation of clean and high-quality bank notes throughout the country. Under this, banks and financial institutions are required and encouraged to withdraw unfit or damaged notes from circulation and replace them with new ones.
RBI’s instructions on ‘clean note policy’ state: “....currency chest branches of the banks must offer, even to non-customers, good quality notes and coins in exchange for soiled and mutilated notes. Complaints, however, continue to be received in this regard from the public and trade bodies that these instructions have not been given full effect.”
The idea behind the ‘clean note policy’ is to maintain the integrity of India’s currency by providing the public with clean, secure and durable bank notes. The central bank’s press release on this also adds, “The Reserve Bank has installed high speed Currency Verification and Processing Systems (CVPS) machines at all its offices which deal with currency. These machines are capable of processing 50,000-60,000 pieces per hour and soiled notes are shredded and briquetted on-line.”