When the government suddenly decided to ban 500 and 1,000 rupee notes a few days ago, there was widespread panic. Effective immediately, those notes can’t be used. They can only be exchanged or deposited in your bank account, if you have one. The maximum amount that can be exchanged (at any one time, anyway) is Rs 4,000. How they came up with such a small amount is a mystery, but hopefully they will revise it.
Lines (mobs, in many cases) at banks are incredibly long as everyone is rushing to change their money. Unfortunately, there aren’t enough smaller notes in circulation for banks to be able to deal with the crisis, so even when you make it to the bank, they may not change the whole 4,000 rupees.
All notes have to be exchanged by 30 December, after which time they will be useless. According to the BBC, Foreign tourists have been advised by the Indian central bank they have until midnight on Friday (November 18) to exchange the discontinued currency at airports.
Money changers are reportedly giving extremely bad rates. One person said they got only Rs1,300 for two Rs1,000 notes.
Soon new 500 and 2,000 rupee notes will be issued, with upgraded security features so they can’t easily be counterfeited. There had been a growing problem with counterfeit notes in recent years, so this will put the counterfeiters out of business at least for a while. Unfortunately, there are reportedly some 23 billion notes that have to be replaced, and who knows how many counterfeit notes are out there— just hope you don’t have any!
Distribution of the new notes has already begun, but so far, they have printed only a small fraction of that amount, and won’t have anything near that many notes ready even by the beginning of the year.
ATMs obviously run out of 100 rupee notes very quickly, so getting money is a real problem for those of us who us ATMs a lot. Unfortunately, it will take 2-3 weeks before the ATMs are recalibrated, so for now they can only give mountains of 100 rupee notes when there are any available. And they are only giving Rs 2,000 per day per card until November 18. From November 19, it will be revised to Rs 4,000. Withdrawing from a bank account, you can get Rs 10,000 per day per branch, up to a maximum of Rs 20,000 in a week (including ATM withdrawals until November 24). All banks are waiving ATM and cash deposit-related charges.
All banks will remain open on weekend, including the public holiday for Guru Purab (November 14). Banks are open till 9pm.
When exchanging money at a bank, you need to bring your passport (or other government-issued ID) along with a photocopy of it. For exchange up to 4,000 in cash, you may go to any bank branch with valid identity proof. For exchange over Rs4,000, which can only be deposited in your account only, you may go to the branch where you have an account or to any other branch of the same bank. If you want to go to a branch of any other bank where you are not maintaining an account, you will have to give valid identity proof and bank account details required for electronic fund transfer to your account.
It is possible to get notes exchanged in a relative or friend’s account. That’s allowed if the account holder gives permission in writing. The banks need the evidence of permission and valid identity proof.
This has also created quite a problem in Nepal, which is the only other country where it is legal to use and exchange Indian currency. The Nepalese government is requesting that the Indian government set up some way to deal with the problem so that Nepalese citizens — and hopefully, the rest of us, as well — can also exchange their notes. People holding large amounts of Indian currency in other countries may be out of luck. Actually, people holding large amounts of cash will be probably be out of luck anyway.
The whole point of this is to combat terrorism, corruption, counterfeiting and ‘black money’, or money that has been hidden away to avoid taxes and illegal activities. Good goals, but they really could have gone about it differently.