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Day 2 of Rs 2,000 note exchange has banks running out of cash for exchange

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Following the Reserve Bank of India’s (RBI) announcement on May 19, the Rs 2,000 currency notes are being withdrawn from circulation. As per the announcement, citizens have been asked to either deposit their notes into their bank accounts or exchange, up to Rs 20,000 at a time, them for smaller denominations.

On Wednesday, day two of the exchange, banks had to halt the exchange due to running out of cash. According to media reports, customers had to wait for the cash to be replenished.

On day one, many media reports stated that people were asked to show valid identity cards for exchange, despite the RBI not mandating this and that banks tried to push people to deposit instead of exchange due to lower cash retention limits.

Canara Bank Chief General Manager (CGM) Bhavendra Kumar said to PTI, “We are maintaining a continuous supply of Rs 500, 200 and 100 denominations notes at all our all branches across Delhi circle to ensure a smooth exchange process of Rs 2,000 rupee notes”. 

The RBI governor, Shaktikanta Das on Wednesday stated that the RBI was closely monitoring banks for the entire exchange process and were confident that they should complete the process by the deadline without any major disruptions. Das also stated that there were no crowds at banks on Tuesday.

The high denomination notes of Rs 2,000 were initially printed during demonetisation in 2016 for the quick replenishment of currencies whose legal tender was withdrawn. RBI Governor claims that the currency is not being used for exchange and can cause collateral issues. Unlike the demonitisation in November 2016, the currency still carries legal tender, therefore can be continued to be used for the purchase and the window to exchange the notes (around four months) is much longer than that in 2016. Moreover, at that time when old Rs 500 and Rs 1,000 rupee notes were banned overnight, the currency notes made up 86 per cent of the currency in circulation, whereas the Rs 2,000 currency notes made up 10.8 per cent of total currency in circulation, reported PTI.

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