Bikky Khosla | 22 May, 2023
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.
In another welcome move, it has recently been reported
that the RBI will make surplus transfer of Rs 87,416 crore to the Government of
India. The central bank, in a statement said, "The board approved the
transfer of Rs 87,416 crore as surplus to the central government for the
accounting year 2022-23, while deciding to keep the contingency risk buffer at
6%". No doubt, this move will also add to liquidity.
I invite your opinions.