Explained: Will Rs 2,000 notes withdrawal impact value of Rupee, demand for gold?

The 2000 rupee banknotes will no longer be in circulation, but they will still be accepted as legal money. This decision was made by the Reserve Bank of India. It has instructed banks to immediately stop issuing banknotes with a value of 2000. 

In November 2016, the 2000 denomination banknote was launched in accordance with Section 24(1) of the RBI Act, 1934, principally to swiftly address the economy's need for cash following the withdrawal of the legal tender status of the 500 and 1000 banknotes in use at the time.

According to experts, the Reserve Bank of India's (RBI) decision to remove Rs 2,000 banknotes from circulation will not significantly affect the price of gold or the value of the rupee.

They assert that there aren't a lot of Rs 2,000 notes in use (or kept on hand in lockers).

"The number of Rs 2,000 currency notes in circulation is not large. This is not like demonetisation of Rs 500 and Rs 1,000 currency notes that happened in 2016," Hareesh V., Head of Commodities Research, Geojit Financial Services, told IANS.

According to Hareesh, there are other investment avenues and further, there is a limit for using hard cash to purchase gold.

(Also Read: Notebandi 2.0: Exchange or deposit Rs 2,000 notes by September 30)

"The RBI decision will also not have any bearing on the gold/silver futures," he said.

"People were aware about the uncertain future of Rs 2,000 currency notes and hence they were not stocking the same. Further, there is sufficient time to change the withdrawn note and hence there is no urgency for the holders of that currency," S. Santha kumar, General Secretary, Madras Jewellers and Diamond Traders Association, told IANS.

He said that as per government rules, cash purchase of jewellery is allowed only up to Rs 200,000.

"There may not be any increased demand for gold or silver due to the withdrawal of Rs 2,000 denomination banknotes," Kumar said.

The RBI on Friday said that Rs 2,000 denomination notes to the value of Rs 3.62 lakh crore were in circulation as on March 31, 2023.

Hareesh said that even if people decide to convert their Rs 2,000 notes into US dollars, there will not be any major impact on the value of the Indian rupee.

"As witnessed during demonetisation, we expect the deposit accretion of banks could improve marginally in the near term. This will ease the pressure on deposit rate hikes and could also result in a moderation in short-term interest rates," Karthik Srinivasan, Senior Vice President, Financial Sector Ratings, ICRA, said.