Exclusive: Bankers reveal why RBI is quietly rolling back the ₹2000 notes
- A top public sector bank was asked to return all ₹2,000 notes in its possession to currency chests on Friday.
- Third-party ATM service providers have been instructed to replace ₹2000 note cassettes in ATMs with cassettes for the new ₹100 note at multiple banks, including those in the private sector.
- Sources told Business Insider that the move is unlikely to have anything to do with fake notes because branches have their own machines to authenticate currency.
The directive came after employees at the bank were issued instructions from the central office to no longer re-load ₹2,000 notes into ATMs or dispense them to people making withdrawals. Customers, however, need not panic as the banks are still accepting ₹2,000 notes from individuals making a deposit. And, they are still legal tender.
New ₹100 notes for ₹2000
Sources at the bank — whose identity we confirmed, requested anonymity because they were not authorised to speak publicly — told Business Insider India that third-party ATM service providers were given instructions to replace the ₹2000 note cassette in ATMs with cassette for new ₹100 notes for multiple banks, including those in the private sector.
These instructions carried out at by bank branches. But, our sources confirmed that such instructions — to change how an ATM will dispense cash — cannot be issued at a branch level and had to have come from higher up.
The RBI is yet to respond to Business Insider's queries on the same.
From tackling the issue of
It's not about fake currency
When the ₹2,000 note was first introduced into the economy after the massive demonetisation exercise in 2016, the RBI assured citizens that the note was as secure as it can be.
However, the incidence of fake ₹2000 notes being seized has been on a rise. In 2017, 53.5% of the value of fake currency seized by law enforcement agencies was made up of ₹2000 notes, according to data collected by the National Crime Records Bureau (NCRB).
By 2018, it further escalated to comprise of 61.1% value share in seized fake currency.
As recently as Sunday, a passenger travelling in from Dubai was arrested in Mumbai at the international airport for being in possession of ‘high quality' fake currency notes worth nearly ₹24 lakh. Nearly 99% of the notes of the value — ₹23.86 lakh — was made up of 1,193 ₹2000 denomination notes.
However, sources tell Business Insider that it is unlikely that the RBI would recall ₹2000 notes over a fake currency issue. "They wouldn't have taken such a big step and would have put the responsibility on the branch," they said.
Bank branches are equipped with fake currency detection machines to detect fraudulent notes. If the central office or the RBI suspects an outbreak, each branch is asked to cross-check all the currency in their possession and issue a verification certificate — attested by the branch in-charge — that all the currency in their possession is real.
Simmer down circulation so that a ₹2000 note ban isn't disruptive
At the time of demonetisation, the ₹2000 note was an easy way to infuse a large amount of cash into the system as the government raced to stay ahead of the economy. However, with smaller denominations returning to the system — its role became less significant.
In October last year, the RBI said that it had stopped the production of ₹2000 notes in response to a right to information (RTI) enquiry. In November 2019, former finance secretary, Subhash Chandra Garg said, "A good chunk of ₹2,000 notes are actually not in circulation, having been hoarded. ₹2000 note, therefore, is not presently working as a currency of the transaction. It can be demonetised, without causing any disruption."
Higher denominations, like a quick fix, come with their own set of problems. Analysts have repeatedly pointed out that high-value notes are a desirable store of value for criminals. In fact, they work against the very purpose of demonetisation — to wipe out black money, money laundering, tax evasion and terror funding.
Despite these issues, in December, the Minister of Finance Anurag Singh Thakur told the Rajya Sabha — higher house of Parliament — that the government had no plans to stop the circulation of the ₹2000 note. This was after many rumours were rife about a possible ban on it.
Sources told Business Insider that restricting the supply for ₹2,000 notes could be RBI's way of restricting the note's circulation, so that if the note is eventually demonetised — it will not cause a big disruption. More so, it could be a precursor of sorts.
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