Government scraps Rs 500 and Rs 1000 notes!

[hemanth.anand]

Last month, my wife had ordered some apparel of INR1100 on COD(Cash On Delivery). it finally arrived today. She was about to give the delivery guy 11 notes of 100 denomination. I stopped and asked him if he had change. He told he has change but will not accept old 500s or 1000s. I told I'll not give him old notes and gave him the new 2000 rupees note. He was surprised and happy as well. He told me that this was the first 2000 denomination note he saw. He gave back 9 notes of 100.

We casually asked if there is any problem because of this situation. He told that they have enough 100s and its business as usual.

immediately after he left, the newspaper guy came. Bill was 140 and i gave 200. He gave 60 without any fuss.

I purchased vegetables today morning and it was all dealt in small denomination notes.

I wonder what all this noise is about that is being shown in the media streams, I'm seeing nothing around me!!!

Also i see many people are not circulating the new notes and keeping it in wallets just because it is new. I don't have any such emotions and will circulate whenever i get a chance to.

[SilentEngine]

Originally Posted by Hudson

Let assume that person to be a farmer. In that case, I guess it would be legitimate income. Any opinions?

He could very well be a farmer considering this was HDFC bank near APMC yard in Yeshwanthpur.
I was less concerned about source of his money, and more by bank's inability to have handled it better. Also 90 lakhs is a bit on the higher side to be depositing in one go, farmer or not, especially given the current context.

[sachinpk]

Originally Posted by Sherlocked

Surely, the builder must have made prior arrangements on how to deal with the old notes.

The builder can show the entire sum as legally received (by selling the flat). May be he had clean account books, have not been on the negative reports of the tax departments. So he expects that the tax folks would not trouble him.

Till Dec 31st any one can walk in to a bank and exchange Rs.500 & Rs.1000 notes. He has to give his ID proof. Any amount can be put in like this. It is only when the tax filing season starts, he may have to answer some questions on his income.

May be the builder in this case knew that the apartment may not be saleable (locality etc.) so decided to get the best deal during the crisis times. There are strong rumours that real estate market is going to get another bloody nose. The tradition has been to use a mix of white & black money when selling flats, and this may need to change now.

[condor]

Originally Posted by Sawyer

I have known this for over forty years now. I am also fully aware of the kind of ruling the government has and has not made in this case.

Then how come you are saying this:

Originally Posted by Sawyer

.. There was zero need for shops and traders, that are honest in their income tax, to stop accepting these notes till a couple of days before the end of the year.

If only honest traders can be allowed accept the notes, you seem to know some way of making dis-honest traders from not being allowed to accept these notes.

I would have thought that one would easily understand that a ban is a ban is a ban -and applied the same way to one and all. This kind of ban has to be implemented at the shortest possible notice, and that's the way it has been done.

And what's the confusion with the currency notes ? Old ones demonetized and hence not to be used in any transaction. These need to be turned in to the Govt in the ways already notified.

[sachinayak]

Originally Posted by hemanth.anand

I wonder what all this noise is about that is being shown in the media streams, I'm seeing nothing around me!!!

This morning, my maid came with a 1000 Rupee note and pleaded with my wife for change. My wife was a bit reluctant to part with her (hard-earned) change, but she did.

If you look at the lower income folks, they do not have bank accounts and are "afraid" to go to banks/atms. There are brokers in each of their localities who will help you change old notes to new (albeit in small amounts that they have) for approx 200 Rs per 1000 Rs of switch.

Sad but true - the poor are hit pretty badly, more due to lack of knowledge and lot of prevailing panic (some unintentional but also some intentionally done by folks with vested interests). For folks like us with credit cards - it is life as usual.

[IndieGooner]

One thing that I don't understand and hasn't seen anyone discussing is - why a Rs. 2000 note?. When the intention is to invalidate existing Rs 500/1000 notes, why not print the same denominations in the new magenta colour and be done with it? As far as I understand the new note is just printed in a different colour/size and does not have any added security features.

Many are having trouble transacting with this new note as without any denomination available between 100 and 2000, seller's inability to give balance is making things difficult. Case close to home - a Rs. 2000 note that my father collected on day one is still in his hand as the local small shops would rather give him credit than balance for Rs. 2000!! Moreover there are reports that ATM machines will need changes before they can dispense the new note. Having same old Rs. 500/1000 but in a different colour could have made life so much easier for many.

[condor]

Originally Posted by sachinayak

If you look at the lower income folks, they do not have bank accounts and are "afraid" to go to banks/atms. .

Jan Dhan Yojana was launched a few months back. But since it was not a mandate - many skipped it. Had people opened accounts, the conversion would have been easier.

Even now, a person can still open an account before the Dec dead-line, and deposit the money . Though the immediate question is about liquidity - and the current crowds at the banks.

[SilentEngine]

Originally Posted by IndieGooner

One thing that I don't understand and hasn't seen anyone discussing is - why a Rs. 2000 note?. When the intention is to invalidate existing Rs 500/1000 notes, why not print the same denominations in the new magenta colour and be done with it? As far as I understand the new note is just printed in a different colour/size and does not have any added security features.

It seems like a stop-gap arrangement to help in exchange of notes. Having 2000 denomination helps banks to exchange with less number of notes. There may be logistical reasons as well, but that's being negated with distribution of bundles of 20s and 50s.

Once all these rationing stops, I won't be surprised if they stop issuing 2000s altogether. In fact they should stop, because otherwise it's even easier way for future hoarders.

[poloman]

Originally Posted by SilentEngine

Once all these rationing stops, I won't be surprised if they stop issuing 2000s altogether. In fact they should stop, because otherwise it's even easier way for future hoarders.

I sincerely hope this is true. 500 and 2000 should be printed in limited quantities and only to suck the immediate cash crunch out of the system. The economy from now on should run on 100. This will severely plug black money transactions and encourage more and more people to use their cards due to logistical issues in carrying more notes. I was pleasantly surprised to see banks dispersing bundles of 10 and 20 notes. This step will add more respect and value to lower denomination notes.

[SDP]

Originally Posted by IndieGooner

One thing that I don't understand and hasn't seen anyone discussing is - why a Rs. 2000 note?. ....

Multiple reasons:
1. Just a color change would have meant that the new fakes notes would be out in a matter of days.

2. The secrecy maintained throughout and the element of surprise was a key aspect in this surgical strike on black money. While the 2000 Rs notes were getting printed, transported, stored; the few people who knew were kept under the impression that 'new 2000Rs notes are coming'. Everyone assumed that this is an 'additional' denomination and that helped in maintaining the news low-key. If new 500/1000Rs notes were getting printed, that news would have leaked and spread like wild-fire, thereby giving ample opportunity to hoarders (of existing 500/1000 notes) to get rid of old notes.

3. When 86% (by value) of the ENTIRE cash of the nation has to be recalled, a higher denomination like 2000Rs note reduces the total number of notes to be printed/transported/handled and thereby increases the efficiency of the exchange process.

4. Have you noticed, the new 500Rs notes are still not out? The reason is exactly same as point #2. If printed early, it would have given advanced notice to the wrong elements.

[chakri400]

Hindustan times reports that: Dainik jagran Journalist broke story about currency demonetisation a fortnight back -http://www.hindustantimes.com/india-news/journalist-broke-story-about-currency-demonetisation-a-fortnight-back/story-3OpgtR5ehdzkRRrwQITLgK.html


Sent from my iPad

[condor]

If so, why arent they showing any clip of that DJ story ?

[sachinayak]

Originally Posted by condor

Jan Dhan Yojana was launched a few months back. But since it was not a mandate - many skipped it. Had people opened accounts, the conversion would have been easier.

Convincing some of these folks to open a bank account is like trying to convince our parents to use a computer or online banking. For us it comes very naturally, but they struggle to do it. They have major mental barriers to take that step.

[asingh1977]

Originally Posted by vivek95

True that. Trust me, I am just beginning to realise in the last 36 hours how much filthy rich people around me are when they started "happily" disclosing about, well you might have already guessed it

And here am I, with Rs. 5 in wallet and surviving on Diwali sweets sent by mom and food coupons of our canteen since last 2 days. No complaints though as I fully support this initiative.

Yups.

It is surprising how much black money the "common man" possesses. Hearing off the shelf cases like: 17L stuck, I know someone who closed a deal of 35L, short of 1C -- person is worried. What the heck. All this is boatloads of cash. Last night my apartment neighbor casually tells me: A friend has 37L tied up. I felt so poor and a looser, hearing all this. A lakh is like an 100 for these people. Gosh.

[mayank0782]

Originally Posted by Sawyer

I have known this for over forty years now. I am also fully aware of the kind of ruling the government has and has not made in this case. And the confusion over currency is all too visible:-)

Here is what RBI says on their website

https://www.rbi.org.in/scripts/FAQView.aspx?Id=119

Please check no. 2.

2. What is this scheme?
The legal tender character of the existing bank notes in denominations of ₹500 and ₹1000 issued by the Reserve bank of India till November 8, 2016 (hereinafter referred to as Specified Bank Notes) stands withdrawn. In consequence thereof these Bank Notes cannot be used for transacting business and/or store of value for future usage. The Specified Bank Notes can be exchanged for value at any of the 19 offices of the Reserve Bank of India or at any of the bank branches of commercial banks/ Regional Rural Banks/ Co-operative banks or at any Head Post Office or Sub-Post Office.

If this does not clear the confusion, not sure what will.