With the withdrawal from circulation of ₹2,000 notes, liability on the book of the RBI will be extinguished for these notes that will come back to the bank. However, there may not be much change in overall liability.

The liabilities of the Issue Department reflect the quantum of currency notes in circulation. Section 34(1) of the RBI Act, 1934, requires that all banknotes issued by the Reserve Bank since April 1, 1935, and the currency notes issued by the Government of India before the commencement of operations of the Reserve Bank, be part of the liabilities of the Issue Department

Why did the RBI withdraw ₹2,000 notes?  Why did the RBI withdraw ₹2,000 notes?  

“When notes are withdrawn from circulation and come back to the RBI, they are taken off from the liability. Same will happen with ₹2,000 notes coming back to the RBI,” a person in the know told businessline.  When asked if this will have an impact on overall liability, the source replied in negative as ₹2,000 currency notes are being replenished by lower denomination notes (₹500, ₹200, ₹100 or even ₹50, ₹20 or ₹10).

‘No need to worry’

On Tuesday, RBI Governor Shaktikanta Das said: ”We have more than adequate quantities of printed notes already available in the system, not just with the RBI, but with currency chests operated by banks. There is no reason for worry. We have sufficient stocks, no need to worry.”

Also read: ₹2,000 note spurned by many retail outlets, petrol stations

This also means more notes in lower denominations will require to be issued in higher numbers and thus, will create more liability. Issuance of notes is already increasing. For example, RBI’s annual report for the fiscal year ending 2021-22 said the ‘notes issued’ increased by 9.86 per cent from ₹28.27-lakh crore as on March 31, 2021 to ₹31.06-lakh crore as on March 31, 2022.

Change in composition of currency in circulation has also been observed post demonetisation.

An SBI research report said the share of small denomination notes (up to ₹100) in total has declined progressively to 9 per cent from 26.7 per cent in 2017 in value terms and to 58.8 per cent from 90.8 per cent in 2017 in volume terms. Currently, ₹500 note has become the major banknote among the masses and constitutes 73.3 per cent of the total value of currency notes by March 22. ₹200 notes has stabilised around 4 per cent of the total value of bank notes.

It may be noted that ₹2,000 denomination banknotes were introduced in November 2016, primarily to meet the immediate currency requirement of the economy after withdrawal of the legal tender status of all ₹500 and ₹1,000 banknotes in circulation at that time. Printing of the ₹2,000 bank notes was stopped in 2018-19.

Notes exchanged and deposited

Now, banks have been asked to prepare a report on daily basis about notes exchanged and deposited. All banknotes in this denomination received by the banks shall be sorted immediately through note sorting machines (NSMs) for accuracy and genuineness and deposited in the currency chests.  At the same time, banks holding currency chests shall ensure that no withdrawal of ₹2,000 denomination is allowed from them. All balances held in the currency chests shall be classified as unfit and kept ready for dispatch to respective RBI offices.

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