Last night before the stroke of the midnight hour, Prime Minister, Mr Narendra Modi supposedly carried out a surgical strike on black money. In a 40-minute address on the eve of November 8, 2016, Mr Modi said Rs 500 and Rs 1,000 notes “will not be legal tender from midnight tonight”
People ran helter-skelter when this news broke out. ATMs witnessed serpentine queues across many parts of the nation -- as everyone wondered how they would transact the next day. There was a concern that ATMs may run out of cash as a result of this, because banks and Government treasuries were asked to remain shut the very next day i.e. November 9, 2016, plus the ATMs on the said date and the day after i.e. November 10, 2016. Hoarders of black money experienced their blood-pressure going up, being worried!
The objective of this ban is:
Interesting findings…
You see, FICN in circulation in the denomination of Rs 500 and Rs 1,000 are comparatively larger as compared to other denominations. In this connection, it may be noted that while the total number of bank notes in circulation rose by 40% between 2011 and 2016, the increase in number of notes of Rs 500 denomination was 76% and for Rs 1,000 denomination was 109% during this period.
The World Bank in July, 2010 estimated the size of the shadow economy (black economy) for India at 20.7% of the GDP in 1999 and rising to 23.2% in 2007. There are similar estimates made by other Indian and international agencies.
Now let’s see how the ban on Rs 500 and Rs 1,000 notes will impact you…
- As mentioned earlier banks and Government will remained closed on November 9, 2016, Besides, ATMs Cash Deposit Machines, Cash Recyclers and any other machine used for receipt and payment of cash will remain shut November 9, and November 10, 2016. So, many individuals holding cash or wanting to withdraw would be panic-stricken.
- You can deposit old high denomination bank notes into your bank accounts and/or exchange with the bank branches or Issue Offices of RBI till the close of business hours on December 30, 2016.
- Old High Denomination Bank notes of aggregate value of Rs 4,000 only or below held by you can be exchanged at any bank branch or Issue Office of Reserve Bank of India (RBI) for any denomination of bank notes having legal tender character, provided a requisition slip (as per format to be specified by RBI) is presented with proof of identity and along with the Old High Denomination Bank Notes. Similar facilities will also be made available in Post Offices. The limit of Rs 4,000 for exchanging Old High Denomination Bank Notes at bank branches or at issue offices of RBI will be reviewed after 15 days and appropriate notification would be issued as may be necessary.
- There’s no limit on the quantity or value of Old High Denomination Bank Notes that can be credited to the account of the tenderer maintained with the bank, where the Old High Denomination Bank Notes are tendered. However, if you haven’t complied with Know Your Customer (KYC) norms with your bank, a maximum value of Rs 50,000 of Old High Denomination Bank Notes can be deposited.
- The equivalent value of the Old High Denomination Bank Notes tendered can be credited to your bank account as the tenderer in accordance with standard banking procedure and on production of valid proof of Identity.
- Third party account can also be credited with equivalent value of the Old High Denomination Bank Notes tendered, provided specific authorisation therefor accorded by the said account holder is presented to the bank, following standard banking procedure and on production of valid proof of Identity of the person actually tendering.
- If you’re unable to exchange your Old High Denomination Bank Notes or deposit the same in their bank accounts on or before December 30, 2016, an opportunity will be given to do so at designated offices of the RBI on later dates along with necessary documentation as may be specified by RBI.
- Your cash withdrawals from the bank accounts over the counter, will be restricted to Rs10,000 a day subject to an overall limit of Rs 20,000 in a week for the first fortnight, i.e., until the end of business hours on November 24, 2016.
- Your withdrawal from ATMs would be restricted to Rs 2,000 per day per card up to November 18, 2016. The limit will be raised to Rs 4,000 per day per card from November 19, 2016 onwards.
- To avoid inconvenience to you for the first 72 Hours, Old High Denomination Bank Notes will continue to be accepted at:
- Government Hospitals and pharmacies in these hospitals
- Railway ticketing counters/ticket counters of Government/Public Sector Undertaking buses and airline ticketing counters at airports;
- Consumer co-operative societies for purchases;
- Milk booths;
- Crematoria/burial grounds;
- Petrol/diesel/gas stations of Public Sector Oil Marketing Companies; and
- At international airports for arriving and departing passengers and for foreign tourists to exchange foreign currency at airports up to a specified amount.
So, if you’re using non-cash methods of transacting viz. cheques, demand drafts, credit/debit cards, mobile wallets, electronic fund transfer mechanisms, you’re saved from the pain.
Why the contention of black money is hoax…
This whole exercise of invalidating the Old High Denomination Bank Notes seems to be an extension of the Income Declaration Scheme (IDS). Although in the immediate few weeks and months, the move will help to check the parallel economy, it is not a permanent solution to eradicate the menace as you may have assumed. The Government plans to release new series of Rs 500 and Rs 2,000 bank notes for circulation from November 10, 2016 – which is potentially a new gateway to black money, although the press release says that infusion of Rs 2,000 bank notes will be monitored and regulated by RBI. Introduction of new series of bank notes will be distinctly different from the current ones in terms of look, design, size and colour.
So, at the outset while this looks to be a surgical strike on black money, the issuance of new high denomination notes raise a question on the intent of curbing black money.
In the past, RBI printed high denomination notes of Rs 5,000 and Rs 10,000. But they were demonetized in January 1978 to curb the growing menace of black money and weren’t reintroduced; unlike the current dispensation.
The ecstasy among the aam aadmi on the “surgical strike” is due to a WhatsApp message doing the rounds. The message suggests that the new Rs 2,000 currency note is embedded with a ‘nano GPS chip’ which will help to keep the parallel economy in check. But these messages appear to be hoax as the RBI hasn’t announced that Rs 2,000 notes will have a ‘nano GPS chip’—there’s no confirmation so far, or a authentic source to validate such messages.
We believe that the Prime Minister’s decision not only affects the common man but also provides no permanent solution to the growing menace of curbing black money.
Add Comments
| Comments |
evmurray@yahoo.com
Nov 09, 2016
Appreciate your balanced analysis & conclusions, contrary to the hype that is circulating all around. |
nsneelakantan1982@gmail.com
Nov 09, 2016
How can you surely say that this is not a Big Step towards Curbing Black Money???.
You cannot say that because you do not know what the Indian Government is going to do next.
If in case you feel that this is not a Permanent solution, then as a expert in Financial Knowledge you let me and the country know what is the Permanent Solution???.
You seem to undermine every effort taken by the Central Government but you do not seem to have any solutions from your side???.
Kindly answer the above questions, if you can.
I will be happy to read your answers.
|
shekharpcy@yahoo.co.in
Nov 11, 2016
Very well articulated article! |
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