India's decision to withdraw 2,000-rupee banknote draws flak
NEW DELHI, India - India's central bank on Friday withdrew 2,000 rupee banknotes, the largest denomination in use, from circulation, rekindling unpleasant memories of demonetisation of high-value notes in 2016.
The 2,000-rupee banknote (worth about US$24) was introduced in November 2016 when the government in a controversial move abolished 500 and 1,000 rupee banknotes.
The old 500 rupee note was replaced with a new design bill.
"The objective of introducing 2,000 rupee banknotes was met once banknotes in other denominations became available in adequate quantities. Therefore, printing of 2,000 rupee banknotes was stopped in 2018-19 (fiscal year)," the Reserve Bank of India (RBI) said in a statement.
"It has also been observed that this denomination is not commonly used for transactions. Further, the stock of banknotes in other denominations continues to be adequate to meet the currency requirement of the public," the central bank said.
The withdrawn banknote will remain legal tender till September 30 and can be exchanged for other denominations at banks up to a limit of 10 notes at a time.
About 89 per cent of these notes were issued before March 2017 and are at the end of their estimated life-span of 4-5 years, the central bank said.
The total value of 2,000 rupee banknotes in circulation was 3.62 trillion rupees (about US$43.7 billion), constituting 10.8 per cent of notes in circulation at the end of March this year, it said.
The value of the two banknotes demonetised in 2016 accounted for 86 per cent of the currency in circulation at that time.
The sudden demonetisation decision more than six years ago led to chaotic scenes at banks all over the country as people tried to exchange their old money for new notes, which were initially in short supply.
The government then said it was aimed at unearthing hoarded money and to curb corruption and illicit wealth.
Former RBI deputy governor R. Gandhi told Indian media on Friday that taking out the 2,000-rupee banknotes from circulation would help in curbing illicit money as people were hoarding the high value currency.
However, critics of the move do not see much value in that argument.
They say Indians who possess unaccounted wealth do not hoard it in the form of currency notes but in real estate, precious commodities and foreign assets.
"The Rs 2,000 note is hardly a popular medium of exchange. We said this in November 2016 and we have been proved correct. The Rs 2,000 note was a band-aid to cover up the foolish decision of demonetising Rs 500 and Rs 1,000 notes which were popular and widely exchanged currencies," said P. Chidambaram, a former finance minister and strong critic of the earlier demonetisation.
According to a study, 3.5 million jobs were lost in the year following demonetisation, with small businesses suffering significant financial losses.
Scores of people reportedly died waiting in long queues and in scuffles for new currency notes at banks and harrowing stories emerged of people unable to pay hospital bills as they lacked newly-minted currency notes.
"The suffering we have endured due to demonetisation can't be forgotten and those who inflicted that suffering shouldn't be forgiven," West Bengal Chief Minister Mamata Banerjee said in her criticism directed at the federal government.
"Some people realise their mistakes too late. The same thing has happened in the case of the 2000-rupee note, but the people and the economy of this country have to pay for it," former Uttar Pradesh state chief minister Akhilesh Yadav said. - BERNAMA
