Withdrawal of Rs 2000 notes may bring down interest rates

Mumbai The RBI said that it would withdraw Rs 2,000 currency notes from circulation. However, the Rs 2000 denomination notes will continue to be legal tender until September 30, a RBI statement said.

The RBI note said, “It has been decided to withdraw the 2000 Rupees denomination bank notes from circulation. The banknotes in 2000 rupees will continue to be legal tender until September 30. Banks may exchange 2000 Rupees banknotes upto a limit of 20,000 rupees at a time.

RBI has also said that 2000 Rupee notes are not commonly used for transactions. Other currency denomination notes are adequate to meet currency needs of the public.

Henceforth, all banks will provide deposit and/or exchange facility for 2000 Rupee banking notes until September 30. RBI has made it clear that there is no restriction on deposit of 2000 Rupee notes into bank accounts.

Commenting on it, Karthik Srinivasan, Senior Vice President Financial Sector Ratings, ICRA, says, “As witnessed during demonetisation, we expect the deposit accretion of banks could improve marginally in near term. This will ease the pressure on deposit rate hikes and could also result in moderation in short-term interest rates."

About 89 per cent of the Rs 2000 denomination banknotes were issued prior to March, 2017 and are at the end of their estimated life-span of 4-5 years. The goal value of these banknotes in circulation has declined from Rs 6.73 lakh crore at its peak in March 31, 2018 to Rs 3.62 lakh crore, constituting only 10.8 per cent of notes in circulation as of March-end.