Deadline for exchanging Rs. 2,000 notes may extend to October-end
The Reserve Bank of India (RBI) is considering extending the deadline for depositing and exchanging Rs. 2,000 banknotes until the end of October, per Moneycontrol. The move aims to accommodate non-resident Indians and others living overseas who are likely to miss the existing September 30 deadline. On September 1, the RBI said that 93% of the Rs. 2,000 banknotes in circulation, worth Rs. 3.32 lakh crore, had returned to the banking system.
Withdrawal of Rs. 2,000 notes part of clean-note policy
The RBI announced the withdrawal of Rs. 2,000 denomination banknotes from circulation on May 19 as part of its clean-note policy. Banks were instructed to stop issuing these bills immediately. The printing of Rs. 2,000 notes ceased in 2018-19 after the goal of having smaller denomination notes available in sufficient quantities was achieved. By July 31, 88% of the notes in circulation had been returned to the banking system.
Banks report no rush for deposits or exchanges
Interestingly, banks have not seen any rush among customers for depositing or exchanging their Rs. 2,000 currency notes. Some top bankers speculate that the deadline extension could be aimed at ensuring the withdrawal of as close to 100% of the currency notes as possible. As of September 1, Rs. 2,000 notes worth Rs. 24,000 crore (7%) were still in circulation. Provisions may be made for those who missed the deadline due to various reasons, such as being abroad or unwell.
Businesses account for the majority of returned notes
Figures from at least three banks reveal that a large portion of the returned Rs. 2,000 notes came from businesses rather than individual customers. After withdrawing these notes, the RBI introduced an Incremental Cash Reserve Ratio (ICRR) to absorb excess liquidity in the banking system. The central bank has not yet commented on the potential deadline extension.
