Withdrawal of ₹2000 note only currency management exercise: RBI to Delhi HC

The Reserve Bank of India (RBI) on Friday informed the Delhi high court that the removal of ₹2000 is a whole exercise under the currency management system while reiterating that it is not demonetisation.

Advocate Parag P Tripathi, for RBI, told a bench of chief justice Satish Chandra Sharma and justice Subramonium Prasad that ₹2000 is not being used as a currency and it is virtually kept out of circulation for some time now.

He further said that over time the quality of the ₹2000 notes had deteriorated.

Opposing a petition challenging the recent notifications on the withdrawal, the counsel said that it was an economic policy decision.

The submission was made while hearing a plea by one Rajneesh Bhaskar Gupta, who had challenged the recent notifications of the RBI.

RBI had on May 19 announced the withdrawal of ₹2,000 currency notes from circulation. The central bank has asked banks to provide deposit and exchange facilities for ₹2,000 notes until September 30, 2023.

Also Read: What India’s removal of 2,000 Rupee notes means for the economy?

The petition mentions that RBI has no independent power under the Reserve Bank of India Act to take such a decision. It also contends that the decision to withdraw the banknote only after 4-5 years of circulation within a specific deadline is “unjust, arbitrary and against the public policy”.

Submitting that the impugned circular does not mention that the central government has taken the decision, the PIL submits that no other reason except the ‘Clean Note Policy’ has been given by the RBI to take such a “big arbitrary decision” on the withdrawal of the banknotes from circulation “without analysing the expected problems of the public at large”.

During the hearing, the court said that it would hear the matter on Monday after RBI’s counsel told the court that the order in a similar petition has been reserved and let the judgment be delivered in that.

Earlier this week, the high court had reserved its order on a plea by lawyer and Bharatiya Janata Party leader Ashwini Upadhyay, who had challenged the notifications by RBI and State Bank of India, enabling the exchange of ₹2000 banknotes without identification proof.

In the fresh petition heard on Friday, the petitioner has contended that small vendors and shopkeepers have already stopped taking ₹2,000 notes. RBI has not cleared so far what is the benefit to the RBI or National Economy after withdrawing the denomination of ₹2000 banknote from circulation, says the petition.

However, the hardship faced by the citizens is very well known as seen during demonetisation of ₹500 and ₹1000 notes in 2016, it said.

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“It is respectfully submitted that the denomination of ₹2000 printed in the year 2016 and later on is in very good condition with strong safety measures and need not required to be withdrawn from circulation under ‘Clean Note Policy’ or otherwise. Moreover, Clean Note Policy only requires withdrawal of damaged, counterfeit, or soiled notes from circulation and not all good banknotes,” the petition read.

The central bank introduced the 2,000 rupee bill to top up the currency notes in circulation after Prime Minister Narendra Modi’s 2016 move removed 500 and 1,000 rupee notes as legal tender.

Printing of the notes ₹2000 notes was stopped in 2018-2019 as larger volumes of other denominations were made available and there was a shift to digital transactions.

Announcing the move late on May 19, the Reserve Bank of India said the ₹2,000 notes had reached the end of their estimated life span.