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The SoCo Hub: Demystifying Demonetization

So Briefly: PM’s Historic move. What happened and what to do now?

SoCo member Pragya Jain, a first-year student of Gujarat National Law University perfectly explains what the government has decided and what the common man needs to do after demonetization begins!

While it was just another day disguised in the pretense of being called ordinary with the country consumed in its own battles ranging from Delhi’s menacing air quality to the rudimentary structure of medical facilities, that our revered Prime Minister made a declaration that contains the power to impact us thoroughly.

In his address, the Prime Minister, Sri Narendra Modi declared that high denomination currency notes of Rs. 500 and Rs. 1000 shall cease to have the character of legal tender post the expiry of 8th November, 2016, leaving the country in deep speculation about the amount value of their money. The primary question that is scaring the daylights out of every common man is what he is going to do with huge amounts of money being reduced to nothing but worthless paper that’s as good as a rough doodle pad.  This means that the currency of those particular denominations will not be accepted anywhere. You could just collect it all and set fire to the pile, no one is going to bat an eyelid.

In this regard, it is worthy of being noted that while the overall growth of bank currency was 40% during 2011-16, the circulation of the denomination of Rs 500 notes increased by 79% and that of Rs 1000 notes increased by 109%! The numerical data effectively corroborates the fact that the denominations of the above two currencies are particularly in a huge supply and circulation than other currency denominations.

Now, we need to know Why That Is a Problem?

In the economic sphere, our country has been perpetually plagued with the terrors of Black Money and Fake Indian Currency Notes (FICN). This is a strategic move taken up specifically to eradicate the proceeds through FICN because:-

  • FICN proceeds are utilized to fund anti-social activities like smuggling of arms, drugs and other contrabands into the Indian Territory.
  • It’s a huge source of funding for terrorism

 

Secondly, black money is a harbinger of economical threats like the creation of a parallel economy which eats into a country’s vitals by inducing inflation and depriving the government of rightful revenue. By creating an underground economy, it corrodes our real economy.High denomination notes are known to facilitate the generation of black money for use of these notes for storage of unaccounted wealth have been revealed by enforcement agencies time and again.

Primarily, it’s these two issues that have necessitated the need for such a powerful reform overnight!

 

What do the people do?

 

While we understand that the policy intends to make amends in economic strata and if successful it shall contribute generously to the progress of our nation, the question that looms like a dagger over our heads is what are the people going to do about it? Policy success takes time and most of us don’t have much. So, here is a list of things that one needs to watch out for in the coming days!

 

  1. 500 and Rs. 1000 notes can be deposited into Banks or exchanged in bank branches or Issue Offices of the RBI till the close of business hours on 30th December, 2016.
  2. There will not be any limit on the amount of the Old High denomination currency notes credited. The amount can be credited according to the standard banking procedure and on production of valid ID proof like PAN card or AADHAR etc. The notes may also be credited to a third part account, provided special authorization is provided by the account-holder.
  3. There is a limit on the exchange amount that is capped at rs. 4000/- only or below. This exchange can take place at any bank branch or Issue office of RBI or the Post Office too has provisions for the same. The cap on the limit will be revised in a period of 15 days.
  4. For the first fortnight post the implementation of this provision i.e. 24th November, cash withdrawal from a bank account over the counter shall be Rs 10,000/- and the maximum limit will be Rs 20,000/- only.
  5. In case of ATM withdrawals, the limit stands at Rs 2000/- per day per card up to November 18th after which it shall be raised to Rs 4000/- per day per card.
  6. For those who are unable to deposit or exchange the same till 30th December, 2016 and opportunity to deposit or exchange will be given at later dates with necessary documentation as specified by the RBI.
  7. Banks and Government treasuries might remain closed on 9th of November while ATMs, Cash Deposit Machines, Cash Recyclers will remain shut on 9th and 10th of November.

 

And finally, 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.

While the policy reform has got everyone glued to their television screen for new developments, the Prime Minister has displayed tremendous confidence in the success of this measure and is positive that he will get the necessary support from the public.

 

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