Hi reshma,

The purpose of having rs 2 lakh in NEET counselling is:

The idea is to reduce the vacancies created due to blocking of multiple seats by students.
The ministry, with the approval of the Medical Council of India (MCI), has proposed a “refundable” registration fee of up to Rs 2 lakh for medical and dental admissions conducted by the central government. The fee for private and deemed colleges is Rs 2 lakh and for government seats is Rs 25,000. It will be adjusted against the tuition fees if a student accepts the seats allotted, or will be forfeited, a senior ministry official said.

The ministry is yet to decide at what stage of the admission process such students will be penalized or debarred. In the first round, students are likely to be allowed free exit without any penalty to let them join a better college/course. The proposal is now with the oversight committee, set up to supervise the MCI’s functioning, which may suggest changes.