The RBI has withdrawn 2000/- notes

The RBI has famously this week withdrawn the Rs. 2000 notes and there seems to be more panic amongst the newsrooms across the nation than the actual public itself.

WHAT’S THE RULE?

From May 23 to Sept 30, all Indians have to deposit the Rs. 2000 notes they are holding in their bank accounts or exchange them for other denominations. And the limit is only 10 notes i.e. Rs. 20000 at a time.

WHY WOULD THE RBI DO THIS?

MOST PROBABLE REASONS –

RBI hasn’t issued new Rs. 2000 notes since 2017. So it is almost redundant.
The Clean Note policy where Indian people should use good quality notes over soiled, old notes
Promoting the use of electronic transactions and Digital Rupee

SPECULATIONS DRAWN BY INDIAN MEDIA –

This is a way to remove black money in the economy
This is a way to divert public attention from actual issues in the nation like jobs and inflation
This is a way to weaken Opposition’s on-ground activity by sucking out their free cash
There is a Nano GPS tip in the new notes
Jan Dhan accounts will be flooded with black money deposited in these accounts for re-routing

MOST COUNTRIES DO IT

You may not know that there is a standard international practice of not having notes of multiple series in circulation at the same time. Countries like Iran, Indonesia, Zimbabwe, Sri Lanka, Venezuela, Nigeria have all demonetized in the past

Reasons for them to do it?

tackle corruption, black money and counterfeit currency
to combat smuggling and the circulation of illicit funds
to combat money laundering
to promote the use of new notes
to protect against financing of terrorism
to promote a cashless society
to streamline national currency
To address hyperinflation

Could this repeat the demonetization type situation in 2016 where over 86% of India’s currency was moved out of circulation?

Experts say stock markets may not get spooked by this
Banks may not experience long queues or confusion
It isn’t a sudden move so people have time
Most were prepared since Rs. 2000 note has not been issued in a very long time at the ATM
Even after Sep 30, 2023 – it will remain valid tender
UPI & digital payments have become more rampant after the pandemic so cash is not king
This is barely 10% of India’s currency in circulation