Why2k Question – Will withdrawing ₹2,000 notes smoke out the crooked? Unlikely. The crooked economy’s much more inventive

Source: The post is based on the article “Why2k Question – Will withdrawing ₹2,000 notes smoke out the crooked? Unlikely. The crooked economy’s much more inventive” published in The Times of India on 22nd May 2023.

Syllabus: GS – 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Relevance: About RBI’s decision to withdraw Rs 2,000 notes.

News: The Reserve Bank of India (RBI) has decided to withdraw the Rs 2000 denomination banknotes from circulation.

Why has the RBI withdrawn Rs 2,000 notes?

What are the concerns highlighted by experts on RBI’s decision?

Creates confusion: The circular said the notes “will continue to be legal tender” while also telling the public to “utilise the time up to September 30 to deposit and/or exchange”.

Does not reduce the black market: People who play with very large sums of money does not depend only on bundles of currency notes. Gold is enjoying a superior premium ever since the pandemic. Further, black marketers also prefer dollars.

Does not address unaccounted cash: The recent SBI circular has said that none of its branches will ask for documents and there are reports that deposits/ exchanges by one person can happen several times a day, and any number of times till the deadline. This is not addressing the unaccounted cash holding.