- Date : 22/06/2023
- Read: 3 mins
The 2000 rupee note is being scrapped, but the impact is expected to be minimal, given the decrease in cash transactions and the rise of digital payments.
The 2000 rupee note will be removed from circulation by the end of this September.
Compared to the 2016 demonetisation, this will not affect currency availability to a great extent.
This will affect some businesses, discretionary purchases and bank deposit growth.
The 2000 rupee note is being ushered out of the Indian economy. With no fresh minting for over four years, this move is not much of a surprise. Generally, currency notes of large denominations are not a healthy sign for the economy. Countries with ultra-high inflation resort to high-value currency notes, with Zimbabwe’s trillion-dollar notes being an obvious example.
Introduced in 2016 due to a currency shortage, the 2000 rupee note had little to do with inflation. Now, as part of the clean note policy, the RBI will scrap it by September 30, 2023.
Will it be sorely missed?
In November 2016, the value of notes in circulation was Rs. 17.97 trillion. Rs. 500 and Rs. 1,000 amounted to 86.4% of this value. Compared to this, the 2000 rupee note accounts for only 10.8% of the money in circulation at the moment. Unlike the demonetised Rs. 500 and Rs. 1,000 notes of 2016, Rs. 2,000 is a legal tender and will remain so till 30th September 2023. So, the impact and panic caused by this withdrawal will be negligible, compared to the 2016 demonetisation.
Unlike in 2016, digital platforms are now a major mode of payment in India. The volume of digital transactions in India has increased from Rs 2070 crore in 2017-18 to over Rs. 12,000 crore in 2022-23. The dependency on currency notes has reduced drastically, with more and more buyers and merchants preferring wallet-based and online transactions.
The 2000 rupee note was introduced due to an insufficient supply of currency, but since 2016, smaller denominations have been issued. As the RBI withdraws the 2000 rupee notes, it is unlikely to cause significant disruption. However, businesses relying on cash transactions, such as agriculture and real estate, may face near-term concerns.
Individuals holding large amounts of cash may need to make unplanned purchases like gold or real estate to dispose of their 2000 rupee notes. On the other hand, banks could benefit from increased deposits, leading to improved deposit growth and liquidity numbers.
You can exchange your 2000 rupee notes for other denominations at any bank branch or make cash deposits in your account. Note the daily deposit limit is Rs. 20,000.