What is RBI's clean note policy? Why was Rs 2000 note withdrawn?

The RBI has announced the withdrawal of Rs 2000 currency notes. For this, the deposit or exchange of notes will start on May 23 and continue till September 30. But the question arises why did the Reserve Bank of India (RBI) need to withdraw the Rs 2000 note? What is the clean note policy?

Cause behind the withdrawal

The RBI is withdrawing Rs 2000 notes under the clean note policy. The RBI clarified that about 89 per cent of the Rs 2000 denomination banknotes were issued prior to March 2017, and they have not been in circulation much among the general public. Apart from this, currency notes of the remaining denominations are available in sufficient quantity.

Printing of Rs 2,000 note stopped in 2018-19

Under Section 24 (1) of the RBI Act of 1934, currency notes of Rs 500 and Rs 2000 rupees were introduced in November 2016. But the central bank stopped printing Rs 2000 notes in 2018-19. Now, the notes have been withdrawn under the clean note policy.

What is the Clean Note Policy?

The clean note policy was brought in the year 1988 to provide good quality notes to the people. This policy was introduced to curb the circulation of fake notes in the country.

How does the Clean Note Policy work?

According to Section 27 of the RBI Act of 1934, no person shall destroy or tamper with notes in any manner whatsoever. The goal of this policy was to keep the notes in circulation and to keep them clean. The new clean note policy was implemented on October 1, 2018, to make digital payments more secure.