Edition 18 – Groundhog day!

RBI on 19th May, 2023 announced the withdrawal of Rs. 2,000 notes from circulation, adding that the notes will continue to be legal tender. The existing Rs 2,000 notes can be deposited or exchanged in banks until September 30, 2023, with a limit of Rs 20,000 at a time for exchange. This event, which is being compared to the 2016 Demonetization, defers materially as Rs. 2000 notes continues to be legal tender. In addition to the same, the intensity of the impact is expected to be limited (if any) since these notes constitute 10.8% of Currency in Circulation and 2% of deposits, unlike 86.9% / 15% during 2016 (Refer Exhibit 1). Moreover, the time-frame for this withdrawal is 4 months compared to immediate impact during de-monitization