The police say the terrorists had Rs 15,000 in cash, including two notes of the new Rs 2,000, and 116 notes of Rs 100.
The terrorists were killed in a gunfight with security forces that went on for hours. Both are suspected to be from the Pakistan-based terror group Lashkar-e-Taiba, the police say.
Images after army searches showed the 2000-rupee notes along with two AK 47 guns.
Banks started dispensing new Rs 2,000 notes two weeks ago, after Prime Minister Narendra Modi banned 500 and 1,000-rupee notes on November 8 in an attempt to check tax evasion and terror funding. PM Modi said terror attacks, including those facilitated by Pakistan, often involve counterfeit Rs 500 notes.
Police sources say it's too early to assess whether the currency ban had any impact on militancy in Kashmir, but, they add, it is not surprising if new notes have found their way to terrorists.
More than 200 terrorists are active in the Kashmir Valley, sources say. In the last year, the police have never found more than Rs 30,000 from any terrorist arrested or killed during encounters.
In parliament today, the government said that demonetisation had a big impact on terror funding and stone-throwing protests in Kashmir.
"Terror funding was badly hit due to demonetisation while there is complete halt in paying money to the stone-pelters in Kashmir," said Minister of State for Home, Kiren Rijiju.
Former chief minister Omar Abdullah took a dig on social media.
I haven't gotten my hands on a new Rs 2000 note but these guys didn't take long to get theirs. https://t.co/vYwOViSpfq- Omar Abdullah (@abdullah_omar) November 22, 2016
Yesterday, four masked and armed men burst into a bank in Kashmir and left with Rs 13 lakh, largely in the old Rs 500 and 1,000 notes.
The robbery took place at a branch of the state-run Jammu and Kashmir Bank in Malpora, 100 km from Srinagar.