Posted by Allison on 29 November 2016, 15:18
Every now and then, we hear that a country is going to take a banknote out of circulation. In May this year, the European Central Bank (ECB) announced it was going to do away with the 500-euro note. This makes sense, since few people use it and few have probably even seen one. Judging by reports from a variety of sources, the only people who seem to use it are those who are trying to move money without being caught – i.e. criminals.
But the Indian government has just made a shock announcement that it is getting rid of the 500 and 1,000 rupee notes. Now, while the amounts might seem large, they’re not – a single British pound would be worth around 84.98 rupees at the time of writing. So, let’s say each pound would get you 85 rupees. You can see one of those 500-rupee notes is worth less than £6.
It shouldn’t surprise you then to learn the two notes that are being demonetised are both in daily use in India. Photos of huge queues at banks across the country shouldn’t come as a surprise either, as millions of residents find themselves with notes they may no longer be able to use.
The announcement was made on 9th November, and the Prime Minister stated that anyone with any of the notes must take them to a bank by the end of 2016 to ensure they could be changed into other notes that are still in circulation. A sudden announcement like this one would be a surprise in any country. However, since nine out of every 10 Indians conduct business in cash rather than using cards, you can see how devastating the move has been.
While the notes can be taken to banks, people only have a few weeks in which to do it. Moreover, nearly half India’s residents struggle to reach banks or use any of their services. And with queues getting longer by the day, some residents are losing money because they cannot work while waiting to exchange their currency.
To give this some extra depth, we should point out the notes that are being got rid of make up around 86% of the notes in circulation. So, we’re not talking about a banknote that is rarely used and has no value other than to make it easier for criminals to move money around.
And in case you wondered, there are trigger amounts beyond which anything deposited will flag up the depositor to have a visit from the taxman. The idea of the ban is to stop tax evasion, so it’s hardly surprising this rule was added as well. However, many Indians are now worried about the future and may even have money they will lose out on because of the changes. We’ll be watching to see what happens next, and what the New Year could bring.