Business Special: Everything You Need To Know- 500, And 1000 Notes Rendered Illegal Tender

By: Jasmine Gambhir, 2016-11-09 08:15:00.0Category:  Awareness
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 Government of India on November 8, 2016 have withdrawn the Legal Tender status of ₹ 500 and ₹ 1,000 denominations of banknotes issued by the Reserve Bank of India till November 8, 2016

Instructions from RBI:

  1. Starting from November 10, 2016, members of public/corporates, business firms, societies, trusts, etc., holding these notes can tender them at any office of the Reserve Bank or any bank branch or at any Head Post Office or Sub Post Office and obtain value thereof by credit into their respective bank accounts.

  2. For their immediate cash needs, these notes of value up to ₹ 4,000 per person can be exchanged for cash over the counter of these bank branches by presenting a valid proof of identity.

  3. Value credited to their bank accounts can be freely used by issue of cheques or by remitting through various electronic modes of transfer like NEFT, RTGS, IMPS, mobile banking, internet banking etc. Cash withdrawals from bank accounts, over the bank counters, will be restricted to a limited amount of ₹ 10,000 per day subject to an overall limit of ₹ 20,000 a week from November 9, 2016 till end of business on November 24, 2016. The limits will be reviewed after this.

  4. All ATMs and other cash machines will remain shut on November 9, 2016 to facilitate recalibration. When ready, they will be reactivated and cash drawals from ATMs will be restricted to ₹ 2,000 per day per card up to November 18, 2016 and the limits shall be raised to ₹ 4000 per day per card from November 19, 2016.

  5. Any person who is unable to exchange or deposit the specified banknotes in their bank accounts on or before December 30, 2016 shall be given an opportunity to do so at specified offices of the Reserve Bank or such other facility until a later date as may be specified by the Reserve Bank.

  6. Until 11th November midnight, old notes will be accepted by:

  • Government hospitals

  • Petrol, diesel and CNG gas stations authorised by public sector oil companies

  • Consumer co-operative stores authorised by State or Central Government

  • Milk booths authorised by State governments

  • Crematoria and burial grounds.

  • Railway ticket booking counters, ticket counters of buses, airline ticket counters at airports.

  1.  Foreign tourists will be able to exchange foreign currency or old notes of not more than Rs 5000 into legal tender.  Arrangements will be made at international airports for arriving and departing passengers who have five hundred or thousand rupee notes of not more than five thousand rupees, to exchange them for new notes or other legal tender.

Be careful!:

  1. Roads in Gujarat and Delhi Mumbai Highway are witnessing long jams because toll booth operators are refusing to accept high denomination notes.

  2. Petrol pump operators are refusing to accept these notes despite orders from the government.

Implications in the following months:

  1. Inflation is expected to come down as black money is left out of the system and conspicuous consumption comes down.

  2. Price of gold is expected to come down as transactions in new currency begin on 11th November.

  3. This move is expected to curb money laundering and corruption.

  4. As the mainstream economy picks up, tax collections will go up.

  5. Traders requiring current accounts will face problems in daily business transactions as there is a limit on getting new currency per day. 

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