Withdrawing Currency from circulation: Good, Bad, and Ugly.(RBI to withdraw 2000 Rs Note from circulation in India)
After the famous demonetization in 2016 when the Government of India banned the currency note of denominations of the face value of 500 and 1000 became worthless overnight s they were not accepted as legal tender nd after sometime 2000 Rs note was launched to cover the currency shortage due to overnight declaring Rs 1000 and 500 as no more as legal tender. In 2023, RBI ordered Banks in India not to issue Rs 2000 notes, which will be fully taken out of circulation after September 30, 2023. At least Government this time suddenly did not withdraw the currency overnight.
Also RBI already stopped printing the 2000 Rs note long back in 2019 which were created to put 14 trillion INR back in Indian market which is caused due to taking out Rs 1000 and Rs 500 Notes from circulation.
Good.
Actually, this step causes people to adopt digital payment methods for INR, and this work in favor of Banks and payment gateways and allows easy tracking of money. Cash transactions can be hidden but digital payments are always recorded and cannot be hidden. Another argument is that it also allows to take counterfeit currency out of circulation if it exists.
Bad
Bank ATMs by default dispense Rs 2000 Notes if the withdrawn amount is greater than 2000, so I guess most people would be having 2000 Rs in their wallet and almost nil probability that this can now be used for any transaction in the market unless they go to bank to return these notes.
I also think there will be again a currency crunch for short time.
Ugly.
Not sure what it can be, last time it cause so much chaos as people rushed to ATM and there was a long line outside the ATM to get the cash from the ATM.
It also has an impact on economic activities because many transactions and deals still happen on cash and it can halt certain economic activities.
Need to wait for few days to understand that in current time if it can halt economic activities or not because these notes contribute more than 33% of total currency in circulation.
Anyways, I think it will cause more digital adoption, and maybe people can transact with alternate ways (like cryptocurrencies) instead of keeping cash with them.