The RBI last week announced withdrawal of Rs 2,000 banknote from circulation. Introduced in November 2016 after demonetization of Rs 500 and Rs 1,000 banknotes to meet the currency requirement of the time, Rs 2,000 banknotes have reached their life cycle, according to the central bank, and the recent announcement states that starting from May 23 all banks shall provide deposit and/or exchange facility until September 30.

While the moved ignited fresh debates in the country, it seems to be an expected and timely move. RBI stopped printing the Rs 2,000 currency notes some 3 years ago, and the total value of the banknotes in circulation has declined from Rs 6.73 lakh crore on March 31, 2018 to Rs 3.62 lakh crore on March 31, 2023. Amid wide speculations that people have hoarded it, the central bank expects that most of the outstanding Rs 2,000 banknotes will come back to the banks by September 30.

Experts point out that the RBI move will help push system liquidity which has deteriorated for quite some time now. Some portions of the 181 crore of Rs 2,000 bank notes now out in circulation will get deposited into banks and although it is yet not clear what this amount will be, according to estimates, this decision to withdraw 2K banknotes may push system liquidity by Rs 0.7 - 1.1 lakh crore. It will – even if it fails to curb black money to a great extent - will benefit the economy.