Applying bandwidth command on interface, will this restrict traffic according to the bandwidth defined.
int fa 0/0
will send and receive be restricted to 2MB as above config.
No, it won't restrict your interface speed to 2MB. But configured bandwidth under interface will be used by routing protocols to calculate their metrics. TCP will also adjust its initial retransmission parameters based on the bandwidth configured on the interface. Also if QoS is used,it will use this as reference bandwidth.
So it is still important to configure interface with right bandwidth statement.