RBI Passed the Order to Withdraw the Circulation of INR 2000 Banknotes
another masterstroke by the Modi Government for the 2024 elections!
The Reserve Bank of India, on 19th May 2023 released the notice about the withdrawal of INR 2000 notes from circulation. The RBI further said that INR 2000 notes will be exchanged with lower denomination notes from 23rd May 2023. People can exchange or deposit these notes in their bank accounts by 30th September 2023. Moreover, the RBI has informed all the banks to immediately stop issuing INR 2000 notes.
To ensure everyone’s convenience and avoid any sort of hassle in the regular functionality of banks, the exchange of INR 2000 notes into other banknotes can be made up to a threshold of INR 20,000 at a time in any bank. There are pure chances that the RBI shall consider extending the deadline from 30th September if needed. But even if post the current deadline, if a person has INR 2000 notes with him, it will remain a valid tender.
After coming to power in 2014, the Modi government declared demonetization and scrapped the higher denomination INR 1000 and INR 500 notes overnight on 8th November 2016. The RBI started printing the INR 2000 notes in 2016 and stopped printing INR 2000 notes in 2018 because banknotes in other denominations became adequate in the economy.
Reasons Behind the Withdrawal of INR 2000 Notes Explained by the RBI
An issue released by the RBI says, “About 89% of the INR 2000 notes were issued before 2017 and they are towards the near end of their estimated lifespan (4-5 years). The total valuation of these notes in 2018 was INR 6.73 lakh crores 2018. But by the end of March 31, 2023, the total valuation of INR 2000 notes has dropped down to 3.62 lakh crores that too when only 10.8% of these notes are in the circulation cycle. Hence, it is quite evident from here that these higher denomination notes are not proactively used for transactions. This decision is an initiative of RBI’s “Clean Note Policy” to ensure the availability and circulation of high-quality bank notes to people across the country.”
An analysis drawn from the “India Digital Payments Annual Report”, by the RBI showed that the hefty use of UPI and digital payments has immensely increased since the last decade. Digital payment modes like UPI, Debit Cards, Credit Cards, and Mobile Cards facilitated transactions worth INR 14.902 lakh crore in 2022.
How will the Withdrawal of INR 2000 Currency Notes Impact the Economy and the Upcoming Elections of 2024?
The successor of the demonetization that took place in 2016, the decision of the Modi Government is yet again a befitting reply to the quantum of black money collection. This is targeted to improve the tax collection actions as well. Market analysts believe that this decision will not cause any setback to the economy, rather it will empower people to march rapidly toward digitalization. As mentioned above, digital payments have brought tremendous ease to our day-to-day lives circulation of currency has already been reduced to a great extent. We won’t have any tough time adapting to the withdrawal compared to that in 2016.
People are praising the decision as most of the INR 2000 banks are with banks and some quantity is hoarded by black money dealers. People with black money are surely in unanticipated trouble and will be exposed anytime sooner.
As this decision has come ahead of the elections in four prominent states of India scheduled at the end of the year 2023, the Modi Government has played a remarkably smart move here. Most of the political parties and corrupt politicians are believed to hoard high denomination bills to fund their election campaigns in an unethical manner. Hence this will further limit their exaggerative spending limits and ensure election campaigns are held on grounds of authenticity and integrity. The printing of INR 2000 notes was paused in 2018 the RBI focused more on printing INR 500 notes and below. Hence those who hold high-value unregulated money or haven’t paid their taxes are on the brink of coming to light. Because the public will naturally refrain from accepting INR 2000 notes and will be adamant about accepting digital payments more.