On 19 May 2023, the Reserve Bank of India issued a circular [RBI/2023-24/32, DCM(Plg) No.S-236/10.27.00/2023-24]. It says that withdrawal from circulation of ₹ 2000 banknotes but will continue as Legal Tender. So, in this blog, we are going to discuss the legal perspective of the withdrawal of ₹2000 banknotes by RBI.
Introduction of ₹2000 Banknotes-
On 8 November 2016, by 08:00 P.M., the PM of India announced demonetization, which was withdrawing two banknotes ₹500 and ₹1000 from circulation with immediate effect. The ₹2000 denomination banknote was introduced in November 2016 under Section 24(1) of the RBI Act, 1934 primarily to meet the immediate currency requirement of the economy after withdrawal of the legal tender status of all ₹500 and ₹1000 banknotes.
Withdrawal of ₹2000 banknotes by RBI-
With fulfillment of the objective of the introduction of ₹2000 denomination and availability of banknotes in other denominations in adequate quantity, the printing of ₹2000 banknotes was stopped in 2018-19 as per RBI. The RBI has further stated that the majority of the ₹2000 denomination notes issued before March 2017, have completed their estimated lifespan and are not observed to be commonly used for transactions anymore. Therefore, it has been decided that, in pursuance of the “Clean Note Policy” of the RBI, the ₹2000 denomination banknotes shall be withdrawn from circulation. Although, the ₹2000 banknotes will continue to be legal tender.
Clean note Policy-
By Clean Note Policy it is meant that the banks and other financial institutions are required to withdraw the bank notes which are unfit or damaged, from circulation and replace them with new ones. The Clean Note Policy was introduced in the year 1999 by the then Governor Mr. Bimal Jalaan. It seeks to give the public good-quality currency notes and coins with better security features, while soiled notes are withdrawn out of circulation.
Those who are having ₹2000 currency notes can deposit/exchange these banknotes till September 30, 2023. The RBI has not yet clarified regarding the status of these currency notes after September 30.
Section 24 – Denominations of notes-
- Subject to the provisions of sub-section (2) bank notes shall be of the denominational value to two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees, as the Central Government may, on the recommendation of the Central Board, specify in this behalf.
- The Central Government may, on the recommendation of the Central Board, direct the non-issue or the discontinuance of issue of bank notes of such denominational values as it may specify in this behalf.
Section 24 of the Reserve Bank of India Bank Act, 1934 provides about the denomination values of bank notes which the Central Government can specify on the recommendation of the Central Board. By denominational value, it is meant by the currencies (₹2, ₹5, ₹10, ₹20, ₹50, ₹100, ₹500,…….). And on the recommendation of the Central Board the Central Government may direct to not issue or discontinuance the issuance of bank notes.
Section 25- Form of Bank Notes-
The design, form the material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Central Board.
Central Board-
Section 2(b) of the Reserve Bank of India Act, 1934 defines the term Central Board. As per this Section “the Central Board” means the Central Board of Directors of the Bank.
Composition of Central Board-
Section 8 of the RBI Act, 1934 provides regarding the composition of the Central Board. The Central Board shall consist of the following :
- A Governor and not more than four Deputy Governors to be appointed by the Central Government.
- Four Directors to be nominated by the Central Government, one from each of the four Local Boards as constituted by section 9.
- Ten Directors to be nominated by the Central Government.
- One Government official to be nominated by the Central Government.
Reserve Bank of India Circular Dated- 19.05.2023-
Now, it has become very clear that the circular of the RBI dates 19.05.2023 concerns only the withdrawal of ₹2000 banknotes. It is not any kind of demonetization like that of November 2016. The circular clearly states that the banknote of ₹2000 shall continue as legal tender. The Currency notes of ₹2000 can be deposited as well as exchanged with the bank. If any rumor reaches you that any demonetization has happened don’t believe in such type of misinformation. Just go to the bank and deposit or exchange your ₹2000 currency notes. For more information please read the RBI Circular.
