Confusion prevails over Rs 2,000 note exchange

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The Reserve Bank of India (RBI) has given people a time period of four  months to exchange their Rs 2,000 notes. The process of exchanging these notes is currently being carried out in banks. There are no long queues like those during the demonetisation era at banks. However, the crowds have increased. There are many queries among people regarding this development, which remain unanswered.

Why did the government take this step?

Three days after the note was withdrawn, the RBI Governor clarified that the move was a part of the currency management system i.e., the introduction or removal of notes from circulation. The government had introduced the Rs. 2000 note and its withdrawal will tighten the reins on black money. No note of any other denomination will be introduced. In other words, the Rs. 500 note shall remain the highest denomination note in Indian currency. During the demonetisation of 2016, 85% of the currency had been taken back by the RBI. In order to cover the shortfall, the Rs.2000 note had been introduced as a new form of currency.

Now, the question arises that if the Rs.2000 note was to be withdrawn, why was it introduced in the first place? This is a contradiction in itself. If the Rs.1000 notes were instrumental in increasing black money in the country, it follows that the Rs.2000 notes would be serving the same purpose, only more so. Whenever raids have been conducted, the maximum amount of currency recovered was in the form of Rs. 2000 notes. However, to date, the government has not clarified the role of the Rs. 2000 note in black money.

Why are some banks asking for identity proof?

The RBI has said that people can exchange their notes at any nearby bank. However, Canara Bank and many private banks such as HDFC Bank as well as Gramin banks are asking people for their identity proof. Private banks are exchanging notes without identity proof of only their pre-existing account holders. As such, people whose banks are located far away and have only private banks close by are facing a problem since the latter are asking for identity proof. It has also been reported that in some banks, there is a shortage of cash to give in exchange for Rs. 2000 notes. As such, the banks are unable to exchange Rs.2000 notes for many people.

Will it invite a notice from the IT department?

The government has directed that at one time, people can exchange only upto 10 notes of Rs 2000. In other words, they can visit the bank more than once and exchange upto Rs 20,000 each time. Since the Rs.2000 notes are still in circulation, some people are using them to purchase jewellery etc. However, jewellers are asking for Aadhar-PAN cards. Many people are fearing that the income tax department may be privy to information of both deposit and spending of large amounts of Rs.2000 notes, which could result in them being sent a notice. After the demonetisation of 2016, this had been the case with many people. This fear is harbored by those people as well whose sales have suddenly increased after the government ‘s decision, resulting in large amounts of cash being deposited in their current accounts. Such people fear that later on, the government may question them on the matter.