RBI withdraws ₹2000 notes: Updates, where to exchange, deposit limit, rules & more

On 19 May 2023 in a landmark announcement, the Reserve Bank of India (RBI) decided to withdraw the circulation of ₹2,000 denomination bank notes from the economy. The ₹2,000 note will continue as legal tender till 30 September 2023. To deposit or exchange the notes, you can visit your nearest bank or RBI’s 19 Regional Offices (RO). Read to for updates on RBI withdraws ₹2000 notes, where to exchange, deposit limit, rules and more.

Further, RBI has also advised banks to stop the issue of new ₹2,000 currency notes with immediate effect.

RBI withdraws ₹2000 notes – Why and overall impact

The RBI withdraws ₹2000 notes – There are several reasons why the RBI decided to withdraw the ₹2000 currency notes:

• The purpose of introducing the high-value ₹2,000 notes was to meet the currency requirements after the old ₹500 and ₹1,000 notes were discontinued in November 2016
• Other smaller-value currency notes are now thoroughly in circulation and hence there’s little demand/need for ₹2,000 notes
• The stock of smaller-value currency note is steady and can meet the economy’s current requirements
• The majority of the existing ₹2,000 notes were issued before March 2017 and are nearing the end of the estimated four-five year life span
• The ₹2,000 notes are not frequently used for daily transactions and the total value of ₹2,000 bank notes in circulation has reduced drastically since 2018
• The move has been initiated to make good quality banknotes available to the public and is a part of RBI’s ‘Clean Note Policy’

Note: Since 2018-19, the RBI has stopped printing new ₹2,000 bank notes. For more details on the RBI ₹2,000 note withdrawal news, read: rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=12505

How to exchange ₹2,000 bank notes?

23 May (Tuesday) onwards, the exchange of ₹2,000 denomination bank notes has opened at all leading banks in India and will continue till 30 September (Saturday). The deposit/exchange limit however is set at ₹20,000 at a time to ensure that regular banking operations and the public in general are not affected.

Steps to follow to exchange/deposit ₹2000 denomination notes in banks:

• Visit any commercial bank to exchange or deposit the old ₹2,000 notes. Alternatively, you can visit RBI’s Regional Offices having Issue Departments. Exchange of notes is a free of cost service. However, if the bank levies service charges on cash transactions and deposits, it may still apply.
• Fill in the exchange or requisition slip with your details e.g., name, date, number of notes etc. Banks reserves the rights to have their own processes for currency note exchange.
• Sign and submit the requisition form/slip along with the ₹2,000 notes and receive banknotes of other denomination from the bank.

There is however some confusion on the need to show ID proof/ Official Verified Documents (OVD) and fill in the requisition form. Though commercial banks can have their own requirements, the RBI guidelines for general cash-deposits and note exchange have to be followed.

For instance:

• The State Bank of India, on 22 May announced that no filled-in requisition slip is required to exchange notes
• At the Punjab National Bank no ID proof is required for exchanging notes, while the South Indian Bank requires ID proof
• Non-account holders of HDFC Bank, ICICI Bank and Kotak Mahindra Bank will have to provide ID proof during note exchange (Source – The Economic Times, 23 May 2023)
• No ID proof is required at the Standard Chartered Bank, Axis Bank, Yes Bank and Bank of India (Source: The Wire, 23 May 2023)
• For HSBC and Federal Bank, for non-account holders, ID proof is required but no form needs to be filled in for exchange of ₹2,000 notes (Source: The Wire, 23 May 2023)

Banks have to comply by the standard regulations with respect to reporting suspicious transactions and basic cash transactions.

Impact and things to keep in mind

The ₹2,000 notes will remain as a legal tender till 30 September. This means that it can still be used for all transactions till the deadline date.

What it means for small business owners?

For a small scale business dealing with petty cash and day-to-day operating expenses, there is little need to panic. The notes can easily be used and/or exchanged and deposited in banks, hassle-free.

On the other hand, there could also be an increase in spends as people would want to use the ₹2,000 notes they have. As per general news, many members of the public have visited petrol pumps, jewellery and precious metal stores, etc. to spend these high-denomination notes.

What it means for banks?

While the timeline provided gives everyone time to plan and prepare, the decision of ₹2,000 note withdrawal could impact the banking system to some extent.

For instance, if people are depositing the ₹2,000 notes into their bank accounts, there would immediately be an increase in total deposits and decrease in currency-in-circulation (CIC). On the other hand, if people prefer to exchange the high-value note for smaller denomination notes, there would be no impact on CIC or deposits.

This is a generally been seen as a temporary situation and not something having a long-term impact on businesses, financial systems, the public and financial systems at large.

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Author: Sohini Banerjee

Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.