Rs 500 and Rs 1000 notes Ban ! … Will You face Hardships?

The scheme looks like an extension of the Government’s previous scheme which ended on September 30, 2016.

Yesterday the Government of India banned Rs 500 and Rs 1000 notes. PM Modi himself informed the Nation about it. Since he made the announcement people are responding to the announcement in different ways. For some it’s a landmark, historic event; for others it’s yet another “scratching my head” times. For the majority of people, today is yet another day as usual. They’re going with their routine lives quite unaware of what the announcement was and how it will affect them.

So without wasting any time lets see why, how and will it be effective sort of questions wrt the banning of Rs 500 and Rs 1000 notes. We will also see what hardships it can bring to the common folks.

According to the Government, the scheme to ban Rs 500 and Rs 1000 notes is to remove the incidence of fake Indian currency notes, majority of which are in the form of Rs 500 and Rs 1000 (nearly 90 percent). The Government says the fake notes are used for anti-national and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. According to messages doing rounds(most likely to be rumors) on mobile web and web, the new notes will have tracking features and they will be tracked via satellite even if they are buried or kept 120 metres below the ground. The fake notes currently present although look similar in appearance to the genuine ones do not fail the security test. But still one can assume that the new new Rs 500 and Rs.2000 (Rs.1000 notes will be scrapped) will have higher security features. Although security features hardly matter in this case, as the Government itself accedes to the fact that the fake cousins of the scrapped ones do not pass the security test.

Question: One can agree to the fact that fake currency may be present within India. But if a ‘Look Alike’ currency note with no compromise on security is circulating now, how will it decrease fake currency when the new notes will arrive. In simple, fake currency is already fooling humans by its looks only. Hence how can one assume that it will not fool humans when new currency will hit the market?

Question: Why is the Government scrapping Rs 1000 note?

Common wisdom says that it’s easier for counterfeiters to make higher denomination notes. This is also proved in this case, when higher denomination notes constitute bear-share (large part) of fake currency. The bigger denomination notes may be fueling the black money economy as well. This brings another question — Why Rs 2000 note?

If the idea is to keep ahead with the counterfeit currency makers, then it will be a money intensive task for the Government. But the moment you choose higher denomination currency, it becomes easier for counterfeit currency makers as well. According to the Government the scheme is to withdraw black money from within India. The Government plans to remove black money by scrapping the current currency. But it will depend on the implementation. We hope the Government will implement it effectively. As the real black money will come out after December 30, 2016. As those who for some reasons were not able to submit the scrapped currency from November 10-December 30 2016, will be given an opportunity to do so till March 31st 2017. But during this time window, they will have to exchange the scrapped currency at RBI appointed Collection points by submitting an affidavit stating the adequate reason.

What is this scheme?

The scheme looks like an extension of the Modi Government’s previous amnesty scheme which ended on September 30, 2016. The scheme was not much success. In that scheme the Government asked the hoarders of black money in any form within India to surrender their black money without furnishing any reason, pay 45 percent tax on it; and turn black into white. From the look of it the idea of scrapping Rs. 500 and Rs. 1000 notes seems to be an extension of that scheme. It will succeed if all the currency stashed within homes or elsewhere is in the form of notes.

The Government says that in order to save the common man from facing hardships because of scrapped currency, it has directed certain transaction points such as hospitals and other necessary services to accept the currency till the next two days.

Question: The definition of necessary services and needs is not exhaustive enough to cover most needs. What about the retail market? What if the shopkeepers show reluctance to accept the currency?

Question:  Does the country has sufficient ATMs to dispense new currency?

Question: Does the country have sufficient bank along with sufficient staff to make a smooth transition?

Question: Does the country has sufficient bank accounts to make a transition from Cash to Virtual Money?

Question: Do people have that much time to stand in long queues in banks, Post Offices etc. to get the currency exchanged?

An example, many daily wage earners don’t even have a bank account; they keep it with them. Will they have to sacrifice multiple days of work to get the currency exchanged? And how inconvenient they will have to face?


The Government’s decision to scrap Rs 500 and Rs 1000 currency notes seems to be an extension of the Government’s previous scheme. The common man in India will face some momentary uneasiness. Which will be extreme in most cases. As retail brick and mortar shops rule most retail transactions in India. The Government has assumed that all the people have transitioned to banks and they will not require any cash in the next 2 months.

Over all, the Government will succeed in taking some black money out as well. The money which it failed to recover during its previous scheme.

[PS: A reader asks do you think the government will bring some kind of amnesty scheme, similar to one which ended September 30, 2016 before March 31st, 2017? … Yes we can assume it will.]

[DISCLAIMER: The information shared here is just an opinion. It’s not actionable intelligence]