What will RBI do with your out-of-use ₹2,000 currency notes?

India's central bank, as part of its 'Clean Note Policy', declared that ₹2,000 currency notes will no longer be in circulation in the world’s fifth largest economy. The Reserve Bank of India has declared September 30, 2023, as the deadline to exchange the to-be-scrapped notes. The notes, however, will continue to be legal tender.

As of March 31, 2023, ₹2,000 currency notes constituted 10.8 per cent of notes in circulation. This translates to about ₹3.62 lakh crore of currency notes. The Reserve Bank of India, while explaining the move, said that the stock of other banknotes in denominations continues to be "adequate" to meet the currency requirement of the public.

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For the ₹2,000 currency notes at the end of their lifespan, the Reserve Bank of India will bring back into vogue its remarkable Currency Verification and Processing System (CVPS).

What RBI will do with scrapped currency notes: About Currency Verification Processing System

The RBI hasrules in place for the disposal of notes unfit for circulation.

The currency notes, after collection from the concerned banks, are deposited at the Issue offices of the Reserve Bank. After grouping and sorting them under the Currency Verification and Processing System (CVPS), the RBI examines the currency notes to determine their genuineness.

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Each CVPS installation is capable of processing up to 60,000 currency notes each hour. CVPS counts the notes and separates genuine ones from fake currency notes. The fake notes are destroyed by shredding.

But there is a catch.

The genuine currency notes which still had quality and life left for circulation before being deemed scrapped, are shredded in a way that they could be recycled into the new currency papers.

This means that the paper used to make the ₹2,000 currency note would eventually come back to your pocket in some other denomination.

What happens to fake or less-qualitative currency notes?

They are shredded and converted into briquettes. Such briquettes are sold for industrial use through a tender invited by the Reserve Bank of India.

In 2016, when India's Prime Minister Narendra Modi announced the demonetisation of about 89 per cent of the country's currency in circulation, RBI's state branch in Kerala state's Thiruvananthapuram sold it to India's only hardboard-making factory, The Western India Plywoods Limited.

The factory in the state's Kannur district reportedly uses a combination of around fiveper cent of the paper pulp created from these notes with 95 per cent of conventional wood pulp to make hardboards.

The Kannur factory reportedly received around 80 metric tonnes of shredded demonetised notes in the first three weeks after November 8, 2016, when the demonetisation was implemented.

WION has reached out to The Western India Plywoods Limited for a comment on the story. The story will be updated if and when they respond.

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