RBI Governor Shaktikanta Das says 50% of Rs 2,000 banknotes back in banking system

The Reserve Bank of India’s governor, Shaktikanta Das, has said nearly 50 per cent of the Rs 2,000 notes in circulation have been returned, with a total monetary value of Rs 1.8 lakh crore.

Last month, the central bank announced that the Rs 2000 note would be taken out of the banking system. The public has been given until September 30, 2023, to deposit all Rs 2000 notes in the banks.

According to the RBI Governor, the move to deposit Rs 2000 notes in banks will increase average liquidity. Das assured the public that there was no need to rush or panic when exchanging the notes. He emphasised that these notes were valid and that no individual or institution could refuse them.

Das was speaking after a meeting of the RBI’s Monetary Policy Committee (MPC). The committee has decided to keep rates stable after its second bi-monthly monetary policy meeting of FY24.

Governor Shaktikanta Das provided explanations and the future outlook of the Indian central bank, highlighting India's economic stability amidst global turbulence. Despite unprecedented headwinds and swift crosscurrents, the Indian economy and the financial sector have showcased resilience and strength.

The RBI held the repo rate steady for the second consecutive time, reflecting moderating inflationary trends. However, it maintained an alert stance, given that uncertainties still exist. If inflation continues to stay within the RBI's estimate, a rate cut might be on the horizon. 

Amar Ambani, Head Institutional Equities, Yes Securities, said post-the RBI policy announcement, "The decision on the stance was not unanimous, with one member dissenting on the same. We can attribute the dissent to the fact that, although liquidity conditions have improved lately due to higher government spending and the gradual withdrawal of Rs 2,000 denomination notes, this is a rapidly changing variable, and the surplus in the banking system is expected to wane on account of advance tax outflows and growing credit demand. Nevertheless, RBI will manage liquidity in a calibrated manner, characterised by variable repo and reverse repo operations, whenever the need arises."

Das also mentioned that the marginal standing facility (MSF) rate remained unchanged at 6.75 per cent. He added that the average system liquidity could see a further uptick as more Rs 2000 notes get deposited in banks.

In his statement, the governor was quite explicit about the persistence of geopolitical conflict and the incomplete nature of policy normalisation globally. Though headline inflation across countries is following a downward trajectory, it remains high, above set targets. While labour markets continue to tighten and demand shifts from goods back to services, central banks worldwide are maintaining high vigilance. Financial stability concerns persist, particularly in advanced economies, though they seem contained due to decisive actions.