The Reserve Bank of India (RBI) is likely to extend the deadline for returning Rs 2,000 currency notes to banks until the end of October, according to a senior official familiar with the development. The initial deadline was set for September 30. This extension would consider non-resident Indians and others living overseas who may need more time to return these notes.

The RBI had announced the withdrawal of Rs 2,000 currency notes from circulation on May 19, citing it as part of its clean-note policy. As of September 1, 93 percent of these notes in circulation, worth Rs 3.32 lakh crore, had returned to the banking system. The notes in circulation at the end of August 31 stood at Rs 0.24 lakh crore.

The objective behind the withdrawal was to do so in a non-disruptive manner, and the extension may aim to secure the withdrawal of the notes as close to 100 percent as possible. Banks have not witnessed a rush to deposit or exchange Rs 2,000 currency notes, with a low daily run rate of deposit/exchange so far.

Data from multiple banks indicated that a significant portion of the Rs 2,000 notes in deposits and exchanges came from businesses rather than individual customers. The RBI had also launched an Incremental Cash Reserve Ratio (ICRR) to absorb excess liquidity in the banking system following the withdrawal of these notes.

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