Rest Assured, Rs 500 Notes Won't Be Withdrawn

While there is rising apprehension within the industry, especially among startups and MSMEs, over recent news reports suggesting that RBI is going to withdraw Rs 500 denomination currency notes, Finance Ministry officials have said there is no such plan. 

“We don't have any plans of withdrawing Rs 500 banknotes in the foreseeable future,” a senior government official told The Secretariat. 

What has created confusion is perhaps the RBI's notification on April 28, directing banks to ensure that all ATMs dispense Rs 100 and Rs 200 notes. This would naturally mean that a sizeable number of Rs 500 banknotes will return to the central bank.

“That is a normal process of currency management. The exercise is aimed at making transactions easier for citizens,” the official said, adding that at present, seven out of 10 people struggle to get transactions completed with Rs 500 banknotes.

More than 85 per cent of the value of the currency in circulation comprises Rs 500 notes, making transactions in cash unviable due to lack of availability of smaller denomination notes.  

The RBI notification said that by September 30, 75 per cent of all ATMs should have facilities to dispense either Rs 100 or Rs 200 denomination banknotes from at least one cassette.

Fake Rs 500 Notes Increase

According to RBI's annual report, while the number of counterfeit notes detected in denominations of Rs 10, Rs 20, Rs 50 and Rs 100 fell during 2024-25, fake notes of Rs 200 and Rs 500 increased. 

In 2024-25, as many as 1,17,722 pieces of Rs 500 banknotes were found to be fake, up from 85,711 in 2023-24. 

“Though the fight against counterfeit currency needs to be taken up seriously, the fact that most fake notes were in the Rs 500 denomination should not be a cause for alarm, considering that over 85 per cent of all currency is of this denomination,” the official added. 

In 2023, the RBI announced the withdrawal of Rs 2,000 notes, though it continues to be a legal tender. Introducing new banknotes or coins of different denominations is part of a continuous process for the RBI.

“Depending on the economy, the need of industry and citizens, the central bank undertakes the exercise of introducing notes and coins in new denominations,” another senior banker with a public sector lender said. 

Meanwhile, to tackle the security challenges emerging from the circulation of fake notes, the government has formed a Terror Funding and Fake Currency (TFFC) cell to address the menace.