Context: 

The Reserve Bank of India (RBI) has decided to withdraw the Rs 2000 denomination banknotes from circulation. 

RBI circular on the withdrawal:

• The Rs 2000 banknote will continue to maintain its legal tender status.
• People can continue to use Rs 2000 banknotes for their transactions and also receive them in payment. 
• However, they are encouraged to deposit and/ or exchange these banknotes on or before September 30, 2023. The RBI has not clarified the status of these notes after September 30.

Why has the RBI withdrawn Rs 2000 notes?

• The Rs 2000 note was introduced in November 2016 under Section 24(1) of The RBI Act, 1934, primarily with the objective of meeting the currency requirement of the economy expeditiously after the legal tender status of Rs 500 and Rs 1000 notes was withdrawn. 
• The RBI issued the majority of the Rs 2000 denomination notes prior to March 2017; these notes are now at the end of their estimated lifespan of 4-5 years. 
• This denomination is no longer commonly used for transactions; besides, there is adequate stock of banknotes in other denominations to meet currency requirements.
• In view of the above, and in pursuance of the ‘Clean Note Policy’ of the Reserve Bank of India, it has been decided to withdraw the Rs 2000 denomination banknotes from circulation.

What is the Clean Note Policy?

• The Clean Note Policy seeks to give the public good-quality currency notes and coins with better security features, while soiled notes are withdrawn out of circulation. 
• The RBI had earlier decided to withdraw from circulation all banknotes issued prior to 2005 as they have fewer security features as compared to banknotes printed after 2005.
• However, the notes issued before 2005 continue to be legal tender. They have only been withdrawn from circulation in conformity with the standard international practice of not having notes of multiple series in circulation at the same time.

News Source: Indian Express

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