On May 19, 2023, RBI announced withdrawal of ₹2,000 denomination banknotes from circulation. File.
| Photo Credit: R. RAGU

The growth in currency in circulation decelerated to 3.7% for the week ended February 9 from 8.2% a year ago, reflecting the impact of the decision of the Reserve Bank of India (RBI) to withdraw ₹2,000 banknotes.

Currency-in-circulation (CiC) refers to notes and coins in circulation, while currency with the public comprises notes and coins in circulation minus cash with banks.

Also read | More than 97% of ₹2,000 notes returned: RBI

According to the RBI, commercial banks have reported double-digit growth in deposits in January, which too can be attributed to withdrawal of ₹2,000 currency notes.

The growth of Reserve Money (RM), as per the RBI data, decelerated to 5.8% as on February 9, 2024 from 11.2% a year ago (8.8% adjusted for the first-round impact of change in Cash Reserve Ratio (CRR).

Components of RM include CiC, banks’ deposits in RBI and other deposits with the central bank.

The growth in CiC , the largest component of RM, decelerated to 3.7% from 8.2% a year ago, reflecting the withdrawal of ₹2,000 banknotes, according to the RBI.

On May 19, 2023, RBI announced withdrawal of ₹2,000 denomination banknotes from circulation.

As on January 31, nearly 97.5% of the ₹2,000 banknotes were returned to the banking system, and only about ₹8,897 crore worth of such notes are still with the public.

The total value of ₹2,000 banknotes in circulation was Rs 3.56 lakh crore at the close of business on May 19, 2023, when the withdrawal of ₹2,000 banknotes was announced.

Public and entities holding such notes were initially asked to either exchange or deposit them in bank accounts by September 30, 2023. The deadline was later extended to October 7, 2023. Deposit and exchange services at bank branches were discontinued on October 7, 2023.

Starting October 8, 2023 individuals have been provided with the choice of either exchanging the currency or having the equivalent sum credited to their bank accounts at the 19 offices of RBI.

The ₹2,000 banknotes were introduced in November 2016, following the demonetisation of the then-prevailing ₹1,000 and ₹500 banknotes.

The last day for returning or exchanging Rs 2,000 denomination banknote is today. According to the Reserve Bank of India (RBI), from October 1, the Rs 2,000 currency note will cease to have its value and will be just another piece of paper. This comes months after the central bank announced that the Rs 2,000 denomination banknotes would be taken out of circulation. Notably, the RBI started printing the Rs 2,000 note in November 2016 after Prime Minister Narendra Modi scrapped high-value Rs 1,000 and Rs 500 notes overnight.

Now, here’s what will happen to Rs 2,000 currency note after today’s deadline:

According to RBI, the Rs 2,000 currency note will remain legal tender even after the September 30 deadline, however, they will not be accepted for transactions. After today, the notes can only be exchanged with the RBI. 

Therefore, today marks the final opportunity for people to exchange or deposit Rs 2,000 notes at their respective banks without any specific limit. A non-account holder could also exchange the banknotes up to a limit of Rs 20,000 at a time at any bank branch.

However, it is important to note that the usual KYC (Know Your Customer) requirements and other legal deposit norms will still be applicable.

How to exchange Rs 2,000 notes

Individuals have the facility to exchange Rs 2000 notes at 19 Regional Offices (ROs) of the RBI. Besides that, one can also exchange Rs 2000 banknotes at any nearby bank branch. 

According to RBI’s guidelines, as these notes are legal tender, the exchange should be done without the requirement of a request slip or ID proof. However, some public sector banks have implemented a different approach. Therefore, it is advisable to have an ID proof handy when exchanging this currency to ensure a smooth transaction.

Meanwhile, earlier this year, the RBI announced that about 93% of the Rs 2,000 banknotes have returned to the banking system since the central bank in May decided to withdraw the high-value note from circulation.