Last Friday, the Reserve Bank of India (RBI) announced that it is withdrawing Rs. 2000 currency notes from circulation. However, the notes will continue to remain a legal tender. It announced a time period of four months, ending on September 30th, to either deposit the currency or get it exchanged at banks.
Why have the notes been withdrawn?
The RBI Governor stated that the Rs 2000 note was only introduced at the time of demonetisation to “facilitate the expeditious expansion of the value of currency in circulation after demonetisation.” This means that after recalling the old Rs 500 and Rs 100o currency notes, there was not enough currency in circulation in India. The Rs 2000 notes were introduced into the economy to speed up the value of currency that was circulated in the Indian economy. 89% of these banknotes were introduced before March 2017 and new Rs 2000 currency notes have not been printed in the past few years. These notes accounted for 50.2% of the country’s currency circulation in 2017 and were reduced to 10.8 %. This meant that as the number of notes in the economy reduced further, coupled with the increase in number of soiled notes, the organic process of phasing out the Rs 2000 notes would be tedious and time consuming.
This move is not the same as the demonetisation in November 2016. By that move, the government had withdrawn all Rs. 500 and Rs. 1000 notes from the Indian economy, thereby taking away 86% of the economy’s currency circulation by value overnight. This time, the RBI states that the Rs 2000 note will still be acceptable as legal tender. RBI is still to release more information about the status of these notes post 30th September.
What is a legal tender?
A legal tender is a form of currency that is recognised by law as an acceptable means for settling debts or obligations. RBI determines which forms of currency are valid for transactions. It currently consists of coins issued by the Government of India under Section 6 of The Coinage Act, 2011, and banknotes issued by the Reserve Bank of India under Section 26 of the RBI Act, 1934.
What is the process to deposit or exchange these notes?
The RBI stated that you can exchange up to Rs 20,000 in Rs 2000 banknotes at a time. This means that you can exchange 10 Rs 2000 notes at a time.
However, if the exchange is done through a business correspondent, then you can exchange up to Rs 40,000 i.e. 20 Rs 2000 notes at a time.
You can exchange the notes at any bank branch, regardless of whether you have an account with them or not. There are no hidden costs for this exchange, you will not be charged any fee for exchanging this currency.
What to do if you need to exchange more than Rs 20,000 in one go?
The RBI has stated that if you need to exchange more than Rs 20,000 in Rs 2000 notes, you can deposit them in your account. There is no restriction on the amount of notes you deposit in your account. You can then make cash withdrawals against this deposit.
Whom can you complain to if a bank refuses to accept the notes?
If any bank employee refuses to accept or exchange the Rs 2000 notes, from now till the 30th of September, you can approach the bank manager. If the bank does not respond within a period of 30 days after the complaint or if you are not satisfied by the resolution then you can lodge a complaint under the Reserve Bank of India’s Integrated Ombudsman Scheme at the complaint management system portal. You can read more about filing a complaint with the banking ombudsman here.