500 and 1000 Rupee notes banned, what to do now?

Taking a historical step, Narendra Modi, the Prime Minister of India announced on 8th Nov, 2016 that the existing 500 and 1000 Rupee notes will no longer have legal tender, thereby becoming obsolete and illegal starting from 9th Nov 2016. Remarkably, 500 and 1000 are the two largest currency (Rupee) notes available for public use in India. The old note of 500 Rs has been replaced by a newer version and there is a new note of 2000 Rs. However, there was no announcement for the replacement of the old 1000 Rupee note.

Today’s announcements will give greater strength to fight corruption, black money, terror & counterfeit currency. #IndiaFightsCorruption pic.twitter.com/TwxHL0YlL9

— Narendra Modi (@narendramodi) November 8, 2016

Steps taken by the Government to minimize the immediate issues:

• No restrictions on non-cash payments by demand drafts, cheques, credit or debit cards and electronic/online fund transfer.
• For the first three days, from 9th to 11th November, the old 500 and 100 Rupee notes will work at the following places:
  – Government hospitals
  – Railway ticket booking counters
  – Airline ticket counters at airports
  – Government buses
  – Milk booths authorised by state government
  – Consumer co-operative stores authorised state or central government
  – Crematoria and burial grounds
  – Petrol, diesel and gas stations authorised by public sector oil companies
• Exchange old notes at any bank, post office while showing your ID proof. However, there is a limit on this of up to Rs 4000 till 24th November.
• Control rooms formed in RBI in Mumbai-  022 22602201, 22602944, will be operable 8 am onwards on November 9.

What’s upcoming?

• Rs 1, 2, 5, 10, 20, 50 and 100, whether note or coin, are all valid and the 100 Rupee note, which is the highest currency note among these is going to see a sky-high demand.
• Share market might see a downfall in the first few days until the realisation of the long term effects of the decision taken by the government.
• Large number of people will rush to banks(and maybe post offices) to either deposit or exchange their old notes to get 100 Rupee notes or the new 500 or 2000 Rupee notes in return.

What to do now?

• First of all, rely on online transactions(net banking, credit or debit card, e-wallets) as much as possible.
• Buy tickets(if you need or you’re going to need them soon), petrol/diesel/gas (if you own a car or motorbike) or other products or services if you need worth Rs. 100 to 400 from the places where old notes are accepted for the first three days and give them 500 or 1000 Rupee notes to get 100 (or maybe 50 or less) Rupee notes back in change.
• Deposit your old notes at your bank or post office account. You get 50 days to do so, from 10th November to 30th December 2016. There will not be any limit on deposits.
• If you need money immediately, exchange the notes from bank or post office or withdraw the money after depositing.
• There will be a limit in withdrawals from banks and post offices- Rs 10,000 per day and Rs 20,000 per week. So, if you need to withdraw more than the limit, do not deposit all your old notes in a single bank account and make use of your other accounts at the other banks and the accounts of your family members if you need. This limit will be increased in the coming days but no date has been mentioned.
• For ATM withdrawals , there will be a limit of Rs. 2000 per day per card in the first few days, which would later be raised to Rs 4000. Here too, no date has been mentioned yet. So again, make good use of the cards of your other accounts and the cards of the accounts of your family members if you need.
• When you withdraw or exchange, you will get the old and valid 100(or less) Rupee notes and the new 500 and 2000 Rupee notes when they are available. Some sources report that the new notes will be available from as early as 10th November.
• Make sure you are not getting any old 500 or 1000 Rupee notes while withdrawing money and if you get any of those notes, bring it to the notice of the cashier of the bank or post office. If you get any discontinued notes from any ATM, you would have to complain to the respective bank and ask for exchange.
• Visit the banks that are not located in prime locations and less crowded in normal days because you will not have to face a huge crowd there as most people will not do the same.

This bold move might affect the lifestyle of the general people a bit at the beginning but the aim of the government is to make a long term effect. At first, there will be confusions among the people and some small and medium businesses can also face difficulties. Especially medium and large retail stores, marketplaces, restaurants, hotels, public transports that trade heavily in exchange of these two larger currency notes might get affected in the upcoming few days by this sudden decision. However, these problems will fade away with time as the confusions get cleared and the new notes become mainstream. The Indian government has taken countermeasures and precautions to handle this massive economical change. This is a big move against black money and this will impact tax dodging, money laundering and terrorism funding significantly.