NEW DELHI: In a recent statement, Reserve Bank of India (RBI) Governor Shaktikanta Das hinted at the possibility of granting additional time for depositing or exchanging the soon-to-be-withdrawn Rs 2,000 notes. However, he emphasized that the majority of these high-value notes are expected to be returned to banks by the September 30 deadline.
The RBI had announced the withdrawal of Rs 2,000 notes, with the exchange and deposit window set to open on Tuesday. Governor Das urged the public not to rush to banks, as a four-month period has been provided for the process. He expressed confidence that most of the notes would be returned by the deadline and added that the legal tender status of the notes would remain unchanged. Furthermore, he assured individuals residing overseas that the RBI would be considerate of their concerns, aiming to facilitate a smooth transition.
Banks are now preparing to handle the reverse flow of Rs 2,000 banknotes starting from Tuesday. The RBI estimates that the majority of the Rs 3.6 lakh crore worth of these high-denomination banknotes currently in circulation will be turned in over the next four months.
To facilitate the process, the RBI has instructed banks to maintain separate daily records for exchanged and deposited notes. The central bank may request this data as needed. Additionally, banks have been advised to provide adequate waiting areas and drinking water, considering the ongoing summer season.
Bank officials have reported numerous inquiries regarding the frequency of note exchanges and the necessary documentation. While banks continue to accept deposits of Rs 2,000 notes as usual, ATM managers are expected to disable the recycling of these notes in cash withdrawal machines.
While branch officers do not foresee any disruption of services regarding the depositing of Rs 2,000 notes, there is uncertainty surrounding the procedure to be followed in terms of proof of identity. Internal risk management processes within banks require them to request such proof. One branch manager stated the importance of maintaining a record of exchanged currency notes to detect counterfeit notes, while another expressed concerns about tracking the number of notes exchanged without proper depositor records.
In the meantime, HDFC Bank has informed its customers via email that they can exchange Rs 2,000 banknotes, subject to a daily limit of Rs 20,000.
Several businesses, including petrol pumps and consumer durables stores, have received an influx of Rs 2,000 banknotes as customers aim to utilize them. Notably, popular food delivery app Zomato revealed that 72% of its cash-on-delivery orders since Friday were paid using Rs 2,000 notes.
Economists predict that the inflow of Rs 2,000 notes into the banking system will temporarily boost liquidity for banks. According to a research note by the Bank of Baroda, if 50% of the total Rs 2,000 notes are deposited, bank deposits could increase by Rs 1.8 lakh crore. However, experts emphasize that this measure offers only temporary relief and is not a permanent solution to liquidity challenges faced by the banking sector.
Pranjul Bhandari, Chief Economist for India and Indonesia at HSBC Bank, stated, “This move could provide some temporary relief to the banking sector’s tight liquidity situation. However, it is important to note that it is not a permanent solution.”
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