India Withdraws 2,000-rupee notes

Banks across India have experienced a significant increase in the exchange of 2,000-rupee notes, as the country initiates the withdrawal of this denomination from circulation. Originally introduced in 2016 after the government discontinued the 500 and 1,000 rupee notes, the decision by Prime Minister Narendra Modi was intended to combat the issue of black money. However, opposition parties argue that the initiative fell short of achieving its intended goal. Individuals have until 30 September to exchange their 2,000-rupee notes.

India’s central bank recently confirmed that while the 2,000-rupee notes, the highest denomination currency in the country, would be phased out, they would still retain their legal status. This means that individuals can continue to utilise them for transactions even after the specified deadline, although banks have been instructed not to issue any new 2,000-rupee notes. In anticipation of the expected surge in transactions, banks have been directed to augment their workforce and counters.

The announcement has sparked concerns among citizens, drawing comparisons to the government’s previous demonetisation move. On 8 November, Prime Minister Modi provided only a four-hour notice to declare that all 500 and 1,000 rupee notes, which constituted 86% of India’s currency, would no longer be valid. The introduction of 2,000-rupee notes swiftly followed this move, aimed at replenishing the circulation of currency. Long queues formed outside banks as people rushed to exchange their 500 and 1,000 rupee notes, leading to instances of fainting and even fatalities during prolonged waits at ATMs.

While the government has sought to reassure the public that this latest measure is not akin to demonetisation, the response has been mixed. Some members of the Bharatiya Janata Party (BJP) have lauded the initiative, labelling it a “second surgical strike on black money.” Conversely, leaders from opposition parties argue that the decision to withdraw the notes in 2016 was flawed, resulting in economic hardships, and perceive the current move as an acknowledgment of that mistake. Following the government’s announcement, there have been reports of individuals utilising 2,000-rupee notes for payments at petrol stations and stores to expedite their disposal.

However, RBI governor Shaktikanta Das urged the public not to rush to banks, assuring them that an ample supply of replacement notes had already been printed. He further downplayed the economic impact of the currency withdrawal, noting that the notes were rarely used.