Withdrawing Rs 2000 Banknote: Demonetization 2.0
Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack
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By Sunil Garodia
First publised on 2023-05-20 02:12:40
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Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack
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There are two ways one can understand the RBI circular withdrawing the Rs 2000 banknotes from circulation. The first is the explanation given by the apex bank that since the printing of the Rs 2000 banknotes had been stopped a couple of years back and there is no plan to print them further, and the notes in circulation have outlived their life of 4/5 years, the same are being withdrawn from circulation in order to maintain the bank's clean note policy. The RBI also said that there is no need for the Rs 2000 notes as the other currency notes in circulation were enough to cater to the cash needs in the economy. It said that the notes will continue to be legal tender.
But the other way to understand the circular, especially since the public have been given time till September 30 to deposit or exchange the notes they have with them, is that it is disguised demonetization. Instead of making a dramatic announcement that the said notes will no longer be valid after September 30 (the time given till that date to deposit or exchange amounts to that only), the bank has tried to confuse the citizens by saying that they remain legal tender. But the proviso is that they remain legal tender only till September 30 as the position after that is not clear.
The actual position is that from the date of the RBI announcement, despite its clear statement that the notes will remain legal tender, no one is going to accept the notes in payment against goods and services as the status after September 30 is not known. Although the RBI has said that if individuals and entities have clear KYC, they can deposit any amount of the said notes in their bank accounts, the fear of questioning later would prevent individuals and entities from accepting such notes, or accept them at a discount.
Since the RBI had stopped printing these notes and banks were in any case not issuing them for long, it is difficult to understand the pressing need for this circular. A simple order to currency chests not to issue Rs 2000 notes to bank branches and deposit the same with the RBI and to bank branches not to issue them to customers but deposit the same with currency chests would have meant that without causing an alarm, the notes would have gradually disappeared from circulation. For the rest that remained in circulation with the public, they could have continued as legal tender. But in issuing the circular, the RBI has created an alarm and given an indication of disguised demonetization of the Rs 2000 banknote.
