In line with industry-wide expectations, the RBI today announced its decision to keep the repo rate unchanged for the second consecutive time in its MPC meeting. Given that this was RBI’s first MPC meeting after the Rs 2,000 note withdrawal decision, the RBI governor Shaktikanta Das did give an update regarding what the trends have been in the past three weeks.
“Approximately half of the total Rs 2,000 notes in circulation have come back to the banks,” the RBI governor mentioned at the press conference after the MPC meeting this morning.
Citing bank data, the RBI governor said Rs 2,000 notes worth Rs 3.62 lakh crore were in circulation as of the end of March 2023, of which notes worth Rs 1.8 lakh crore have come back. About 85% of these notes that returned to banks have come back as deposits, Das revealed. This is in line with expectations, he said.
The RBI announced the Rs 2000 note withdrawal on May 19, 2023.
Following the announcement to scrap India's highest-denomination banknotes, economists had said they expected bank deposits to rise by as much as Rs 2 lakh crore, as per ET.
According to analysts, higher deposits will bring down banks’ deposit costs and likely impact their net interest margins or NIMs positively as credit demand remains broadly unchanged. As per RBI data, the percentage of Rs 2,000 notes at the time of their withdrawal was just 10.8% of total notes in circulation, which is a big drop from Rs 6.73 lakh crore at its peak in March 2018.
Why The RBI Decided To Withdraw Rs 2000 Notes
The RBI withdrew Rs 2,000 notes from circulation in May as part of its 'clean note policy'. At the time of withdrawal, the central bank justified its move by saying these notes have served their purpose. As per an official announcement, people who hold these notes with them can get them exchanged or deposit them by September 30.
Unlike in the case of 2016's demonetisation, the present Rs 2,000 notes will continue to remain legal tender, as per RBI's statement.
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