Why Rs. 2000 still a Legal Tender if RBI expects all Notes to Come Back

The RBI has withdrawn the circulation of Rs. 2000 denomination notes from the economy through a notification issued on 19th May 2023. The notification made very clear that it will continue as a legal tender. It’s a relevant question that if RBI expects all Rs. 2000 notes to come back, then why should it continue as a legal tender. In order to understand this, it is important to know what is a legal tender and why RBI banned Rs. 2000 notes from circulation. In a theoretical point of view, legal tender is the form of payment that is recognized by law for settling financial obligation or it is a medium of exchange. Now we have notes Rs. 10, Rs. 20, Rs. 50, Rs. 100, Rs. 200, Rs. 500 and Rs. 2000 as legal tenders. Also there are some coins too which have the status of legal tender. Currently, Rs. 2000 is the highest-valued legal tender. And it was introduced at the time of the demonetisation in 2016. During the time, Rs. 500 and Rs. 1000 notes were stopped being legal tenders in India. To meet the currency requirement, the RBI issued Rs. 2000 notes and further, the government and RBI issued new models of Rs. 500 and Rs. 1000 notes again. The governor of the RBI asserted that after the fulfilment of the introduction of the Rs. 2000 notes, their circulation was ceased. Additionally, citizens have 4 months until September 30, 2023, to exchange or deposit notes at the bank without providing identity. Without identification documents, it will be simple for those who hold black money to convert it to white. And that will have a big negative impact on government revenue. But the question is why it’s not being stopped as a legal tender right now as there will be no purpose with this Rs. 2000 when it’s not in the economy or in the hands of people? Shatktikanta Das, RBI Governor was reluctant to answer the question of what will happen after September 30. According to him it’s speculative and cannot be answered right now. He also refused to tell the legal validity of the currency after the deadline of the month of exchange or deposit. From the inferences of the present scenario, it can be assumed that the government or the RBI don’t want to announce that the Rs. 2000 note is no longer a legal tender like happened back in 2016. The reactions of the public, economists, media and others might have stopped them. However, the reason is not out yet. As long as it’s not stopped from being a legal tender, the people who have black money and inappropriate assets can easily find the solution and can turn them white. The common people can’t still understand the agenda of the RBI withdrawing Rs. 2000 notes and still continuing it as a legal tender. It’s a question that should be addressed by the reserve bank. Even though the RBI said that they ceased giving Rs. 2000 notes in 2018–19, there are still 3.62 lakh crore notes in circulation, which is only half of the total amount that were initially in circulation in March 2017 (6.57 lakh crores). And the greatest percentage will be held by those who possess black money, benames, and terrorist funds rather than by ordinary individuals. Even the governor advised the public to see it as a currency management operation of the RBI, as a statutory body it is their responsibility to answer the consequences to the public without saying it’s speculative or changing. The fact that they make decisions, put them into effect for the general public and subsequently say they can't predict the next steps is really disappointing. Regarding the ID proof, the RBI made another significant error in which the Delhi High Court is currently reviewing it as part of a Public Interest Litigation filed by the Advocate Ashwini Kumar Upadhyay. Consequently, it's unclear if the Rs 2000 note would still continue as a legal tender after September 30, 2023. The reason they wish to keep it as legal tender even after it has been taken out of circulation is an unanswered question. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates