Denomination Of ₹2000 Banknotes – Withdrawal From Circulation; Continued As Legal Tender

Posted On - 1 June, 2023 • By - Yashita Muthamma


Demonetization was a bold move by the Indian government to combat corruption, counterfeit currency, and the informal economy. During this exercise, the government invalidated the existing ₹500 and ₹1000 banknotes, replacing them with newly introduced denominations, including the ₹2000 note. The rationale behind demonetization was to promote a cashless economy and encourage digital transactions. However, retaining the ₹2000 denomination in circulation contradicted the government’s initial intent and raised concerns about the effectiveness of the demonetization effort.

Tackling Black Money:

One of the primary reasons for withdrawing ₹2000 denomination banknotes from circulation is to combat black money. High-value banknotes facilitate large-scale cash transactions, making it easier for individuals to hoard illicit wealth. By phasing out the ₹2000 notes, the government can put a dent in the black money ecosystem. Additionally, it would force those with large stashes of illicit cash to disclose their wealth or risk losing its value entirely, thereby deterring tax evasion and illegal activities.

Promoting Digital Payments:

Another crucial factor in favour of withdrawing ₹2000 denomination banknotes is the promotion of digital payments. The demonetization exercise was intended to shift the country towards a cashless economy, but the continued presence of high-value banknotes hinders this objective. By eliminating the ₹2000 notes, the government can encourage people to adopt digital payment methods, reducing reliance on physical cash and promoting transparency in financial transactions.

Ease of Transition and Public Convenience:

Another factor supporting the continued circulation of ₹2000 banknotes is the ease of transition and public convenience. After the demonetization, the introduction of the ₹2000 denomination aided the process of remonetisation by providing a higher-value note. Discontinuing these banknotes abruptly could cause inconvenience and disrupt transactions.

Maintenance of Cash Demand:

One reason for the RBI’s decision to maintain the ₹2000 banknotes as legal tender could be to meet the cash demands of the Indian economy. Despite the government’s push for digital transactions, cash remains an essential mode of payment, especially in rural areas and for low-value transactions. By retaining the ₹2000 denomination, the RBI ensures that a higher-value banknote is available to meet the cash requirements of businesses and individuals.

Counterfeit Detection and Security Features:

The ₹2000 banknotes incorporate advanced security features that make them difficult to counterfeit. Discontinuing them may lead to counterfeiters attempting to replicate the same denomination or focusing on other available denominations. By keeping the ₹2000 banknotes in circulation, authorities can continue to educate the public about security features and counterfeit detection, minimizing the risk of counterfeit currency circulation.


The decision to continue ₹2000 denomination banknotes as legal tender ensures the smooth functioning of the Indian economy. It helps meet the cash demand, facilitates public convenience during the transition, and maintains a focus on counterfeit detection and security features.