It could be the end for India’s 2,000 note
Though these high-value notes will remain legal tender, future is uncertain
Dubai: Banks across India are reportedly recalibrating their ATM machines to replace the high-value 2,000 rupee notes with 500 rupee ones, raising questions about the future of the high-value denomination.
Although there has been no official confirmation from Reserve Bank of India (RBI) or other authorities, on the withdrawal of the currency from circulation, there have been widespread news reports the currency is being gradually taken out of circulation. It is assumed that this could be part of the strategy of the central bank to keep a tab on the total amount of high-value currency in circulation, as part of its efforts to combat hoarding, tax evasion and counterfeiting of notes.
Last week, Indian Bank, a leading public sector bank, said that it will no longer keep 2,000 rupee notes in its ATMs, citing public inconvenience, who found it hard to exchange the notes. The decision will come into effect on March 1. (However, the bank’s branches will continue to offer these notes.)
A number of other banks also said they are in the process of recalibrating their ATMs to replace the 2,000 notes with smaller denomination notes such as Rs100, 200, and 500.
Printing stopped
As per an RTI (right to information) query in October last, the printing of 2,000 rupee notes had been stopped for the preceding 18 months. The central bank printed 3.54 billion worth these notes in the financial year 2016-17, which declined to 111 million in 2017-18 and plunged to 46.7 million in the year 2018-19, the RTI query had revealed.
It also revealed that not a single 2,000 rupee note has been printed in the current financial year.
Failed mission
Prime Minister Narendra Modi, in a dramatic move, demonetised banknotes of 1,000- and 500- rupee notes in 2016 and introduced fresh banknotes with denominations of 2,000 and 500 notes, which he claimed had the ability to tackle black money and corruption. However, in 2017-18, about 56 per cent fake currency in the new 2,000 rupee notes was seized in India, as per the recent National Crime Records Bureau (NCRB) data. (NCRB also highlighted how the fake 2,000 rupee notes had a presence across 27 states and Union Territories.)
At the launch of the 2,000 rupee note it was claimed that the new ones have additional security features that would make them impossible to be copied by counterfeiters, hence curbing the problem of fake currency. However, the government data showed that violating the security barriers in new notes was not a difficult task.
New demonetisation?
Finance Minister Nirmala Sitharaman on Wednesday said that no instructions have been given to banks on stopping issuing notes of 2,000 rupee denomination.
“As far as I know, no such instruction has been given to the banks (on stopping issue of 2000 rupee notes),” she said at a meeting with heads of public sector banks.
The minister’s comments come after reports of ATM recalibration to phase out of 2,000 rupee notes and that the largest currency denomination will remain legal tender, but would be gradually phased out of public circulation.
But the RBI data show the share of 2,000 denomination notes of the total notes in circulation dropped 3 per cent in 2018-19 against 3.3 per cent in 2016-17, that is, immediately after the demonetisation of old currency notes of 1,000- and 500 rupee notes. In terms of value, the share of 2,000 rupee notes was 50.2 per cent in 2016-17, which later fell to 31.2 per cent in 2018-19.
Gradual withdrawal
Although the Ministry of Finance or the RBI have not given the final verdict on the future of 2,000 rupee notes, bankers said it is destined to go out of circulation in a gradual manner. While asserting there is no reason to panic, some bankers said it will be wiser to unwind the stock if anyone is holding large quantities of these notes.