MUMBAI: Indian citizens have started exchanging 2,000-rupee ($24; £19) notes at banks as the country proceeds with its plan to withdraw the currency from circulation. The 2,000-rupee note was introduced in 2016 after the Indian government invalidated 500 and 1,000-rupee notes in a move to combat black money. However, opposition parties argue that the initiative failed to achieve its intended goals.
The deadline for exchanging the notes has been set for September 30th, after which the Reserve Bank of India (RBI) plans to gradually remove them from circulation. Although the notes will no longer be legal tender, they will retain their legal status, allowing individuals to use them for transactions even after the deadline. In response to the expected high volume of transactions, banks have been instructed to deploy additional staff and counters.
The announcement of the currency phase-out has caused some panic among the public, drawing parallels to the government’s 2016 demonetization move. On November 8th, Prime Minister Narendra Modi announced that all 500 and 1,000 rupee notes would cease to be valid with only four hours’ notice. The introduction of the 2,000-rupee notes was intended to quickly replenish the currency supply. The demonetization measure resulted in long queues outside banks and reports of people facing hardships while waiting in ATM lines.
Indian Govt Clarifies the Exercise is Not Repeat of Demonetization
The government has clarified that the current currency withdrawal is not a repeat of demonetization. However, opinions on the move vary. Some lawmakers from the ruling Bharatiya Janata Party (BJP) have praised it as a second strike against black money, while opposition leaders argue that the decision to withdraw the notes in 2016 was flawed and had a negative impact on the economy. They perceive the current move as an admission of that mistake.
Following the government’s announcement, there have been reports of people using the 2,000-rupee notes to make payments at petrol stations and shops in an attempt to dispose of them. However, RBI Governor Shaktikanta Das urged the public not to rush to banks, assuring them that an ample supply of new notes was already available for exchange. He also noted that the withdrawal of the currency notes would have a marginal impact on the economy since they were seldom used.
