2 in 3 citizens surveyed support withdrawal of 2000 rupee note but want government to only permit deposit and no exchange; Believe current approach will lead to conversion of black money into lower denomination notes

May 25, 2023, New Delhi: There appears to be no fear or much less panic among common man following the Reserve Bank of India (RBI) announcement on May 19 of plans to withdraw INR 2,000 currency notes from circulation. Much ahead of the official announcement, there was buzz in the market that the central bank was planning to stop circulation of INR 2000 as a result of which traders and common man had started showing reluctance to accept the currency.

The central bank has stated that the INR 2000 notes would remain a legal tender and people can exchange or deposit the INR 2,000 notes in their bank account by September 30. "Exchange of INR 2,000 banknotes into banknotes of other denominations can be made up to a limit of INR 20,000 at a time at any bank starting from May 23, 2023," the RBI statement said. Existing Income Tax requirement of PAN for INR 50,000 or more deposits in bank accounts will apply on INR 2,000 notes as well. RBI has asked banks to stop issuing INR 2,000 notes with immediate effect.

Since the RBI announcement, there have been reports of an increase in buying of transport fuel, gold and silver jewellery even as precious metal prices have risen further. However there is no panic buying as witnessed in 2016 after the demonetization of INR 1000 and INR 500 currency notes. "There have been a lot of inquiries about purchasing gold or silver with INR 2,000 notes, hence the higher footfalls….. However, due to strict KYC norms actual purchase has been less," Saiyam Mehra, chairman of the All India Gem and Jewellery Council (GJC) told PTI. Based on a survey of small jewelers in various cities, the All India Jewellers and Goldsmith Federation in a statement clarified that “none of them accept rupees 2000 notes for gold in premium”.

RBI Governor Shaktikanta Das said on May 22 that the decision to withdraw INR 2,000 currency note from circulation is part of the currency management operations of the central bank and in tune with the clean note policy. He once again clarified that the INR 2000 currency notes were introduced in 2016 to primarily replenish the notes withdrawn following demonetization and the purpose has been fulfilled.

The RBI stopped printing of INR 2,000 banknotes in 2018-19 once banknotes in other denominations were available in adequate quantities. In March 2017, INR 2,000 notes made up 50.2% of the total value of currency in circulation. On March 31, 2020, the share of INR 2000 denomination banknotes was 22.6% in terms of value to the total notes in circulation and by March 31, 2022, the share had dropped to 13.8%, according to a finance ministry statement in parliament.Currently, the total value of these banknotes in circulation has declined from INR 6.73 lakh crore at its peak as on March 31, 2017 (50.2% of value of notes in circulation) to INR 3.62 lakh crore constituting only 10.8% of the value of notes in circulation on March 31, 2023.

Having been instrumental in capturing public pulse during demonetisation in 2016, LocalCircles has conducted a survey to gauge how citizens view this new economic development and whether the public/ small and medium sized businesses fear any disruption due to the withdrawal of the INR 2000 currency note, which is the highest value currency in circulation. The survey received over 57,000 responses from citizens located in 341 districts of India. 64% were men while 36% respondents were women. 49% respondents were from tier 1, 34% from tier 2 and 17% respondents were from tier 3, 4 & rural districts.

64% of respondents in support of the RBI move; 22% are opposed to withdrawal of 2000 rupee note

The survey first sought to know if the citizens “support the government’s move of withdrawing from circulation the 2000 rupee note by Sept 30, 2023, while letting it continue to be a legal tender past that date?” This query received 11,541 responses with 64% of respondents indicating support to the RBI move. The data shows 64% of those surveyed support the move; 22% are opposed to withdrawal of the 2000 rupee note; 12% indicated it makes no difference to them; and 2% of respondents are not sure.

64% of those surveyed indicate that they have no INR 2000 notes while 6% indicated that they have INR I00,000 or more in 2000 currency notes

The survey next sought to know “how much amount do you currently have in your possession as a household in 2000 rupee notes?” This query received 12, 121 responses with 64% of those surveyed indicating that they have no INR 2000 notes while 6% indicated that they have INR I,00,000 or more in 2000 rupee notes. Apart from 64% who have no 2000 rupee notes, the data shows 15% have up to 20,000 rupees; 7% of respondents indicated that they have between 20,000 to 40,000 rupees; 6% have between 40,000 to 1,00,000 rupees; 2% of respondents have 1,00,000 to 2,00,000 rupees; 2% have 2,00,000 to 10,00,000 rupees and 2% of respondents have of 10,00,000 rupees in INR 2000 currency notes. The respondents included 2% who “don’t want to disclose”.

68% of respondents believe that RBI’s proposed move to allow 2000 rupee note to remain a legal currency after September 30 will enable those with black money to exploit the situation

The survey next sought to know whether the government announcement of plan “of withdrawing the 2000 rupee note from circulation by Sept 30 but allowing it to continue being used as a legal tender even after that, will allow those with black money in 2000 rupee notes to convert it into lower denomination currency?” This query received over 12,000 responses with 68% stating that “yes, they will be through many avenues”; 14% stating “no, they won’t be able to” and 18% indicating “can’t say”. Overall, the majority believe that the RBI proposed move to allow 2000 currency notes to remain a legal currency will enable those with black money to exploit the situation and convert them into lower denomination currency through exchange if they have not been able to do so by Sept 30 if proper scrutiny is maintained by banks.

Only 34% of those who have the 2000 rupee note have attempted to use it till now post the government announcement

The fourth survey question sought to know from citizens whether they “have attempted to use the 2000 rupee note post the government announcement about its withdrawal from circulation?” Only 34% of the 11,253 respondents to this query indicated that they have tried to use the 2000 rupee notes they have with them, while 66% or two-third of the respondents stated that they “don’t have the 2000 rupee note or haven’t attempted to use it.”

91% of those who attempted to use the 2000 rupee note stated that they “have experienced difficulty in using the 2000 rupee note” following the RBI announcement

Ahead of the RBI announcement, it was sometimes difficult to use the 2000 rupee note, given the rumors that it would be phased out. The follow-on fifth question sought to know from citizens “did you have difficulty in using the 2000 rupee note post the government announcement about its withdrawal from circulation?” Out of 3,826 who responded to this query, 91% stated that they “have experienced difficulty in using the 2000 rupee note while only 9% denied experiencing any difficulty.

Many citizens with the 2000 rupee note reveal difficulty in being able to use it at retail stores, chemists, hospitals, service providers and even petrol pumps since the RBI announcement

Another follow-on or the sixth survey question sought to know from citizens following the government announcement “where all have you experienced difficulty in getting the other party to accept your 2000 rupee notes?” Some among the 3,482 respondents to the query indicated more than one option. The biggest difficulty according to 15% of respondents is getting “retail merchants/ stores” to accept the currency; 13% of respondents indicated the “chemists”; 9% indicated “hospitals”; 9% stated “service providers”; 6% “petrol pumps”; 4% indicated “jewellers”; 4% indicated the 2000 rupee note is not being accepted as “cash on delivery for ecommerce orders”; and 13% of respondents indicate problems at other points of payment not mentioned above. It appears that RBI’s assurance of 2000 rupee notes being a legal currency despite plans to withdraw it has increased fears about whether it would remain so after September 30 and fears of loss if it is not accepted as a legal currency.

68% of citizens surveyed want 2000 rupee notes to be deposited in bank accounts and want Government to prohibit any exchange

In the backdrop of India’s largest bank State Bank of India announcing that it would permit exchange without necessary documentation, the last question of the survey sought citizens’ views on whether the RBI move “to minimize the risk of black money in 2000 rupee notes getting converted into lower denomination currency through the exchange route, should the government only permit deposit of these notes into bank accounts and prohibit any exchange?” Not too surprisingly 68% of citizens who responded to this query stated “yes, this must absolutely be done”; while 29% opposed it indicating that “exchange should also be permitted as it is right now” and 3% of respondents gave no clear response.

In summary, unlike in 2016 when demonetization of 500 rupee note and 1000 rupee note was done, the withdrawal of 2000 rupee note this time doesnt appears to affect too many citizens as the survey shows that 64% of those surveyed have no INR 2000 notes while 6% indicated that they have INR I00,000 or more in 2000 currency notes. Interestingly, while the RBI has stated that 2000 rupee notes will remain a legal currency even after September 30, the last date for deposit/ exchange of INR 2000 notes, the survey has revealed that 34% of respondents with the 2000 rupee note have attempted to use it till now and 91% of them have found it difficult to use it since the government announcement.

Respondents revealed difficulty in use of 2000 rupee notes at retail stores, chemists, hospitals, service providers and even petrol pumps. While the motive behind the RBI move remains ambiguous despite claims that it is part of the clean note policy and that since 2018, when printing of 2000 rupee notes stopped being printed, as the currency situation stabilized in the country, why is the currency being withdrawn from circulation but will continue to be a legal currency. The survey shows that 68% of respondents believe that RBI’s proposed approach of exchange will enable those with black money to exploit the situation and convert it into lower denomination currency. Two-third of the citizens surveyed want 2000 rupee notes to be deposited in bank accounts and for the Government to not allow exchange so that the Government is able to tax this black money in the due course.