A Note Retires

The RBI’s move to recall ₹2,000 notes, while largely along expected lines, does have the potential to cause ripples in some sectors of the economy

-  ANAND ADHIKARI

KILLING BY HANGING or injecting a lethal dose has the same effect!” A former senior official of the Reserve Bank of India provided the insightful analogy in a LinkedIn post. This aptly describes the future of the ₹2,000 notes. RBI recently set in motion a policy to completely take out these currency notes from the system. “They were issued as a stop-gap measure,” says Vimal Kumar, Associate Professor at IIT Kanpur, who has written research papers on black money. In fact, the signs of the impending decision were visible much earlier. For instance, their numbers had started falling within two years of their introduction.

Per RBI’s annual report, the number of ₹2,000 notes fell from 3.36 billion pieces in March 2018 to 1.81 billion pieces in March 2023. (See box). In value terms too, it has almost halved from ₹6.51 lakh crore to ₹3.62 lakh crore in six years. “This approach represents a well-structured method of implementing such a measure while minimising disruptions to both the general public and the industry,” says a private banker on condition of anonymity.

The numbers in the RBI annual report also indicate their gradual disappearance from the banking system, with ATMs rarely dispensing them, and even banks struggling to acquire them. “This denomination did not have major use cases. Though unusual uses, such as in stacking unaccounted cash, cannot be denied,” says Manas Paul, Professor of Economics, Environment and Policy at IMT, Ghaziabad.