Why Rs 2,000 notes are being scrapped? SBI issues guidelines on how you can exchange your notes

The Reserve Bank of India (RBI), in a surprise move last week, announced that Rs 2,000 notes will no longer be in use and recommended people to deposit or exchange them for lower denominations before September 30. Following this statement, it urged all banks in India to offer a deposit or exchange facility to people for Rs 2,000 notes. It is to be noted that after the deadline, the notes will not be considered illegal but will still remain tender in India. 

Soon after the announcement was made, many people were seen approaching banks to exchange notes, despite it being stated that the process will begin only on May 23. Everyone is confused and having questions like- is there a limit to how many notes of Rs 2,000 can be exchanged or deposited at once? Or do we need to give identity proof for exchange? 

Answering all these queries, the State Bank of India (SBI) issued important guidelines for its customers and branches.

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But why are the Rs 2,000 notes being junked?

The Rs 2,000 banknotes were introduced in November 2016 under Section 21(1) of the RBI Act, 1934, which allows the central bank to issue currency notes not exceeding Rs 10,000. 

With the fulfilment of its objective and availability of the banknotes, the printing of Rs 2,000 notes was stopped in 2018-2019. However, the circulation drastically dropped, bringing the value to Rs 3.62 trillion on March 2023 from Rs 6.73 trillion in March 2018. 

As per media reports, things changed when in Feb 2020,  ATMs were recalibrated by the banks to disperse more Rs 100 and Rs 500 notes, and not Rs 2000. This sparked speculation that Rs 2,000 notes were being phased out even if they remained legal tender.

The central bank also pointed out that a huge cluster of fake notes was also produced. 

Below are the guideline issued by the State Bank of India:

An individual can exchange Rs 2,000 banknotes up to a limit of Rs 20,000/- at a time. No identity proof or requisition slip is required to be submitted by the depositor at the time of exchange. 

“Please arrange accordingly and extend all cooperation to members of public so that the exercise is conducted in a smooth and seamless manner without any inconvenience to the public,” the SBI said in its guideline.

It is expected that after SBI, all other banks will follow the same 2000 note exchange policy at their branches.

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