INDIA will start withdrawing 2,000-rupee (S$32.5) notes from circulation, its central bank said on Friday (May 19), adding that evidence showed the denomination was not being commonly used for transactions.

The notes will remain legal tender, but people will be asked to deposit and exchange them for smaller denominations between May 23 and Sep 30, the Reserve Bank of India (RBI) said.

“The stock of banknotes in other denominations continues to be adequate to meet the currency requirement of the public,” the RBI added in a statement.

The 2,000 rupee note was introduced in 2016 after the Narendra Modi-led government abruptly withdrew 500 and 1000 rupee notes to clamp down on forgeries. The move took away 86 per cent of the economy’s currency in circulation by value.

The government began issuing new 500 rupee notes days later, and added the 2,000 to replenish currency in circulation at a faster pace.

However, since then, the central bank has focused on printing notes of 500 rupees and below and has printed no new 2,000-rupee notes in the last four years.

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“Withdrawal of a currency note is demonetisation and this is a sensible form of demonetisation,” said Pronab Sen, economist and former chief statistician of India. “...RBI may set a date when they cease to be a legal tender.” REUTERS