What is RBI’s ‘Clean Note Policy’, why are notes being withdrawn under it



The Reserve Financial institution of India (RBI) has determined to withdraw the Rs 2,000 notice after solely seven years of circulation underneath the ‘Clear Be aware Coverage’. Whereas current notes will proceed to carry authorized tender, right here is all you must learn about RBI’s Clear Be aware Coverage and its impression on the notes in circulation within the nation:

What’s RBI’s Clear Be aware Coverage?

The aim of the RBI’s Clear Be aware Coverage is to supply residents with high-quality foreign money notes and cash whereas eradicating worn-out notes from circulation, the Central Financial institution mentioned in a press release.

The RBI has instructed banks to present the general public solely clear and good-quality notes, avoiding the recycling of worn-out notes obtained by them.

To realize this, the apex financial institution has put in high-speed Forex Verification and Processing Techniques (CVPS) machines in any respect its places of work that cope with foreign money. These machines may course of 50,000-60,000 notes per hour, and outdated notes had been shredded and compacted.

This coverage was first introduced in 1999. Throughout his tenure because the deputy governor of RBI, Vepa Kamesam labored to replace the know-how in banks. Underneath his steerage,the general public was inspired to not write on foreign money notes, whereas banks had been instructed to supply unrestricted trade providers for dirty and broken notes.

In keeping with the Reserve Financial institution’s directions, even non-customers needed to be supplied with good-quality notes and cash in trade for worn-out and broken ones on the foreign money chest branches of banks.

In October 2018, the brand new clear notice coverage was launched so as to make digital funds safer.

How does the Rs 2,000 notice fall underneath this coverage?

The brand new Rs 500 and Rs 2,000 notes had been launched in November 2016 underneath Part 24 (1) of the RBI Act of 1934. By 2018-19, the central financial institution had already printed new Rs 2,000 notes.

The RBI had already stopped printing new notes in 2018-19, lower than three years after its introduction.

Final week, RBI mentioned that the worth of Rs 2,000 notes in circulation has almost halved from Rs 6.73 trillion in 2018 to Rs 3.62 trillion as on March 31, 2023.

In keeping with knowledge out there on RBI’s web site, the share of those notes fell from 2.4 per cent in 2020 to 1.6 per cent in 2022.

The rationale behind RBI’s announcement is that these notes had been launched to quickly trade money throughout demonetisation and now there may be ample provide of smaller denominations to fulfill the foreign money necessities of the nation.

Moreover, there at the moment are sufficient shares of banknotes in different denominations that meet the foreign money necessities of the nation and the banknotes aren’t generally used for each day transactions.

What occurs now?

The RBI requested the general public to cease utilizing the Rs 2,000 rupee notes on Friday. Folks have been instructed to both deposit or trade their notes for decrease denominations. As much as Rs 20,000 could be deposited/exchanged at a time.

On Monday, RBI governor Shaktikanta Das mentioned that the central financial institution expects all Rs 2,000 notes in circulation to return to RBI by the tip of September. Additional choice shall be taken on the premise of the variety of notes which can be returned. 

An analogous step was taken in 2013-14 when RBI had withdrawn all notes issued previous to 2005. The choice was made to counteract the insurgence of counterfeit notes in circulation.