The RBI has decided to withdraw the $2,000 bill from circulationbut it has specified that these will continue to be legal tender.
Members of the public have been asked to deposit their holdings of Rs 2,000 in a bank or exchange them for notes of other denominations such as Rs 500 or Rs 100.
The exchange of banknotes can be done until September 30, 2023 and has a limit of ₹20,000 per transaction. Deposits of $2,000 can be made without any limits.
The exchange of ₹2,000 banknotes can be done at any bank branch or RBI regional office. There will be no fee levied on such an exchange.
Can the Rs 2,000 note be used to purchase any goods or services, repay debt, etc.?
Yes, they can be used to buy anything, pay off debt, etc as they are still legal tender. But note, that will stop after September 30, 2023.
People can only use these to make purchases for the next four months. But then, the seller may not want to accept these bills because he would then have to go to the bank to convert them into a different denomination.
Also read: What the Center’s decision to scrap the Rs 2,000 note means for the Indian economy
What is the difference between the cancel monetization of 2016 and this exercise?
Well, the government seems to have learned its lesson. So they didn’t completely ban the ₹2,000 notes but allowed them to stay in effect until the end of September. No panic is likely.
Second, the ₹2,000 note accounts for only 10.8% of the currency in circulation, and the amount in circulation has halved since 2018. The RBI has stopped printing them since 2018-2019. This is not like 2016 when people were holding 1,000 and ₹500 bills that were worthless and had to be exchanged immediately for other scarce notes.
Third, with notes of other denominations such as Rs 500, Rs 200 and Rs 100 in full supply, economic activity is unlikely to be affected.
What is the intention behind this move?
The RBI are saying that the ₹2,000 bills have been around for about 4 to 5 years and are therefore dirty and need to be removed from circulation.
But the real reason may be to hit the black money hoarders who will use them aggressively in the parliamentary elections and the Lok Sabha.
It is well known that the black economy in this country is huge and that most businesses, professionals and organizations do not disclose their entire income to the tax authorities. Such money will be kept as a ₹2,000 note and will now have to be converted to other denominations.
Is the IT department on high alert right now?
Likely. Anyone who regularly visits the bank will be checked. High value deposits will be under the scanner. Data collected from banks can potentially be used for further investigation. The mules will likely be put to use again to convert notes. A lot of movies are expected in the coming months.