India wakes up today morning with the knowledge that all the currency notes they have in the twin denominations of Rs.500 and Rs.1,000 have been demonetised.
Years after the fall of its twin towers this very day is forgotten, as America is busy counting votes, Indians are busy counting notes. Ironically, the twin syndrome still seems to haunt us, for us it is the fall of the twin currency, the two biggest denomination notes which dominated the cash transactions in this country since a long time.
Lauded by most, ridiculed by some, this sudden move has even left some spellbound in shock and disbelief. But let me be candid to say that the move has taken the nation by surprise.
The Government says that the move will help India move towards a cash-less economy where most transactions are done electronically and can be tracked. It is supposed to be a major assault on black money, fake currency and corruption.
High denomination notes are known to facilitate generation of black money. This is evident from the fact 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 thought behind:
The demonetisation of these high value currency notes is done with a view to curb financing of terrorism through the proceeds of the Fake Indian Currency Notes (FICN) and the use of such funds for subversive activities such as espionage, smuggling of arms, drugs and other contrabands into India, and for eliminating black money which casts a long shadow of parallel economy on our real economy.
Use of FICN facilitates financing of terrorism and drug trafficking. Use of high denomination notes for storage of unaccounted wealth has been evident from cash recoveries made by law enforcement agencies from time to time. Unfortunately, for a common person, the fake notes look similar to genuine notes.
The decision to cancel the legal tender character of the high denomination bank notes of Rs.500 and Rs.1,000 denominations issued by RBI till now seems to be a follow-up of the steps taken so far by the Government to curb the menace of black money in the economy.
The steps that we had seen so far include setting up of a Special Investigative Team (SIT), enacting a law regarding undisclosed foreign income and assets, amending the Double Taxation Avoidance Agreements (DTAA) of our country with Mauritius and Cyprus, trying to reach an understanding with Switzerland for getting information on Bank accounts held by Indians in HSBC, encouraging the use of non-cash and digital payments, amending the Benami Transactions Act and implementing the Income Declaration Scheme 2016.
The sudden move:
The sudden move by the Government without any pre-warning is surely because the government wants to crackdown on fake currency producers on a massive scale.
If given time to react, these forgers may have got away by bringing in the forged currency into circulation. This sudden announcement will entail huge losses to these people and also to various terror outfits which are known to be holding hordes of fake money in these denominations.
The initial inconvenience:
On 9th November, i.e. today, Banks will be closed for public transactions and ATMs will not work for the two days of 9th and 10th November.
This sudden move is surely going to cause a bit of inconvenience to the public but this is something which we all need to go through for the best interests in the long run.
The Government has informed that in order to avoid inconvenience to the public 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.
The old currency notes can also be used during this period, i.e. up to 11th November, 2016 for purchases at consumer co-operative societies, at milk booths, at crematoria/burial grounds, at petrol/diesel/gas stations of Public Sector Oil Marketing Companies.
In order to mitigate the inconvenience to foreign travellers and foreign tourists, arriving and departing passengers at international airports and foreign tourists shall be allowed to exchange foreign currency at airports up to a specified amount.
The use of existing Rs.500 and Rs.1,000 notes.
The existing Rs.500 and Rs.1,000 notes will not be legal tender anymore except for transactions mentioned above during the first 72 hours.
However, our money remains our own, if it is legally earned and stored. We can walk in to our Bank and deposit the cash lying with us in these currency notes into our own account without any limit within a period of 50 days up to 30th December, 2016.
For those who want to exchange the old currency notes with them, they can walk into any Bank branch and exchange the same with notes of other denomination. However, for the initial week, one can only exchange Rs.4,000 worth of currency in a day which is proposed to be doubled to Rs.8,000 in 15 days.
There would be no change in the currency exchange in any other form, be it transactions by cheque and demand drafts, electronic fund transfers and payments through credit and debit cards.
If for any reason, we are unable to deposit our existing currency in these demonetised notes into our Bank account within the specified time period, we need not panic. The Government has clarified that just by furnishing our ID proof and making a specified declaration about the source of the cash, we can get them exchanged with RBI up to 31st March, 2017.
For all of us who must be wondering that henceforth we may have to deal in only small denomination currency notes, we need not fret on that count too. The new notes of denomination of Rs.500 and Rs.2,000 with high security features will be available for withdrawal from the ATMs and from Bank counters w.e.f. 11th November, 2016.
However, cash withdrawal from a bank account, over the counter will be restricted to Rs.10,000 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. 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.
The doubting Thomas:
Any sudden move is sure to create doubts in the minds of the common person and I hope these clarifications can throw some light on it:
- No Transaction Charge: No transaction charge will be deducted by thebanks for these cash deposits.
- Valid ID Proof: Any ofthe following documents in the form of Aadhaar Card, Driving License, Voter ID Card, Pass Port, NREGA Card, PAN Card, Identity Card Issued by Government Department, Public Sector Unit to its Staff shall be treated as valid ID proof:
- Where to exchange the notes: The exchange facility is available at all Issue Offices of RBI and branches of any commercial banks/RRBS/UCBs/State Co-op banks or at any Head Post Office or Sub-Post Office.
- I am right now not in India: If one is not in India presently and is holding these demonetised currency notes, one may authorise in writing enabling another person in India to deposit the notes into one’s bank account. The person so authorised will have to go to the bank branch with these currency notes, the authority letter and his valid identity proof.
- I am an NRI holding only NRO account: A NRI holding just a NRO account is allowed to deposit these currency notes into the NRO account.
- Should I go to the bank personally: It is preferable that the account holder may go personally. However, if personal visit is not possible due to any reasons, a representative may be sent with a written authority letter and his valid identity proof.
- I do not have a bank account: One can deposit in another person’s account if that account holder relative/friend gives permission to do so in writing. While depositing, one should provide to the bank, evidence of permission given by the account holder and one’s valid identity proof.
- I need to understand more: The control room of RBI can be approached on the telephone numbers: 022-22602201/022-22602944 or via email.
- Can you clarify some nagging doubts: You may read the operational guidelines issued by the Government given below. In case you still have doubts, shoot out your queries and doubts in the comments section below with your email ID and I shall try to get back with the reply to the extent possible.
The operational guidelines:
In order to implement the above decisions of the Government and keeping in view the need to minimise inconvenience to the public, the following operational guidelines have been issued:
(i) Old High Denomination Bank Notes may be deposited by individuals/persons into their bank accounts and/or exchanged in bank branches or Issue Offices of RBI till the close of business hours on 30th December, 2016.
(ii) Old High Denomination Bank Notes of aggregate value of Rs.4,000 only or below held by a person can be exchanged by him/her at any bank branch or Issue Office of Reserve Bank of India 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.
(iii) The limit of Rs.4,000 for exchanging Old High Denomination Bank Notes at bank branches or at issue offices of Reserve Bank of India will be reviewed after 15 days and appropriate notification issued, as may be necessary.
(iv) There will not be any limit on the quantity or value of Old High Denomination Bank Notes to be credited to the account of the tenderer maintained with the bank, where the Old High Denomination Bank Notes are tendered. However, in accounts where compliance with extant Know Your Customer (KYC) norms is not complete, a maximum value of Rs.50,000 of Old High Denomination Bank Notes can be deposited.
(v) The equivalent value of the Old High Denomination Bank Notes tendered can be credited to an account maintained by the tenderer at any bank in accordance with standard banking procedure and on production of valid proof of Identity.
(vi) The equivalent value of the Old High Denomination Bank Notes tendered can be credited to a third party account, 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.
(vii) Cash withdrawal from a bank account, over the counter will be restricted to Rs.10,000 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.
(viii) There will be no restriction on the use of any non-cash method of operating the account which will include cheques, demand drafts, credit/debit cards, mobile wallets and electronic fund transfer mechanisms.
(ix) 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.
(x) For those who are unable to exchange their 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 them to do so at specified offices of the RBI on later dates along with necessary documentation as may be specified by the Reserve Bank of India.
(xi) Instruction is also being issued for closure of banks and Government Treasuries, on 9th November, 2016.
(xii) In addition, all ATMs, Cash Deposit Machines, Cash Recyclers and any other machine used for receipt and payment of cash will remain shut on 9th and 10th November, 2016.
(xiii) The bank branches and Government Treasuries will function from 10th November, 2016.
(xiv) To avoid inconvenience to the public 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; for purchases at consumer co-operative societies, at milk booths, at crematoria/burial grounds, at petrol/diesel/gas stations of Public Sector Oil Marketing Companies and for arriving and departing passengers at international airports and for foreign tourists to exchange foreign currency at airports up to a specified amount.