Huge queues outside banks in India after currency swap shock

 

 

NEW DELHI: -- Indians are reeling from the prime minister’s decision to take certain bank notes out of circulation.

 

The measure to withdraw 500 and 1,000 rupee bills was introduced in an effort to stamp out corruption.

 

However, the move which came in a sudden announcement on Tuesday, has not been simple in an economy with is largely fuelled by cash.

 

The new 2,000 rupee and 500 rupee notes will be put into circulation over the next three to four weeks, meaning many were desperate for smaller bills.

 

“There is a huge shortage. We don’t have any small denomination bills. My pockets are empty and so is my home. There is a shortage of smaller bills everywhere. If you go to buy milk, the milkman is not accepting money. At petrol pumps, they are not fuelling for less than 500 rupees. The shortage is immense,” said one man standing outside a bank.

 

The idea is to flush out so-called ‘black money’ from the economy and bring millions into the tax system.

 

While it has hit many of the country’s poorer residents who often keep savings in cash, many in the financial community welcomed it as a bold move in the long-term, once the initial teething problems are resolved.

 

-- © Copyright Euronews 2016-11-11

India is not alone. The EU says it will no longer produce the 500 Euro note.

 

The US is also talking of phasing out high-denomination notes, which makes no sense when inflation means that smaller notes will hardly buy anything after a decade or so.

 

India's explanation for the move mirrors that of other administrations. But there is another possible explanation with more sinister and far-reaching imlications

 

When the next financial crisis hits (not if - it's just a matter of time) the lack of large-denomination notes will make it much harder for depositors to physically withdraw their cash deposits from dodgy banks. An amount which would now fit into a suitcase might well require a lorry to shift!

 

In an era of record-low interest rates, some banks are already charging savers for the privilege of looking after their surplus cash and the obvious temptation is to keep it at home instead. But you can't stick a lorry-load of cash in a home safe, let alone under the mattress.

 

(Yeah, I know - I'm just another crazy conspiracy theorist).

Agreed! What chance a middle class person buying into bank shares and so getting a little back??

8 hours ago, webfact said:

 

The measure to withdraw 500 and 1,000 rupee bills was introduced in an effort to stamp out corruption.

Oh Oh here it comes soon to your country possibly. Another government move in the guise of "stamping out corruption" Wow a turkey like this so close to Thanksgiving. 

I can see this is a huge problem in the short term. The 1000 rupee note is the highest denomination so getting rid of this and the 500 is getting rid of a 15 USD note and a 7.5 USD note. Imagine no notes larger than the 100 which they have which is 1,5 USD. They should simply have finished the 2000 and new 500 rupee note and then phased them in swapping them for the old notes as they went along.

1 hour ago, Andaman Al said:

I can see this is a huge problem in the short term. The 1000 rupee note is the highest denomination so getting rid of this and the 500 is getting rid of a 15 USD note and a 7.5 USD note. Imagine no notes larger than the 100 which they have which is 1,5 USD. They should simply have finished the 2000 and new 500 rupee note and then phased them in swapping them for the old notes as they went along.

 

And considering the sad condition of many lower denomination notes in India, quite a strain on everyday life of poor and medium class people. Guess credit card companies and online sales going to get a boost though.

 

11 hours ago, Krataiboy said:

When the next financial crisis hits (not if - it's just a matter of time) the lack of large-denomination notes will make it much harder for depositors to physically withdraw their cash deposits from dodgy banks. An amount which would now fit into a suitcase might well require a lorry to shift!

India is replacing the 1,000 rupee note with a 2,000 rupee one.

What is the difference between paying "Tea Money" in form of 2 1-thousand notes versus paying with a single 2 thousand note?

 

Somebody please enlighten me. Cheers.

I can only imagine trying to live life in Thailand using only 20/50/100 baht notes. A total nightmare.

A thousand rupees is just over 500 baht. Maybe a well intentioned planed, poorly thought out and

even more poorly implemented.

23 hours ago, swissie said:

What is the difference between paying "Tea Money" in form of 2 1-thousand notes versus paying with a single 2 thousand note?

 

Somebody please enlighten me. Cheers.

 

I think the new notes will be easier to track by banks and government agencies. In theory, having less cash floating around would also help to deal with not-too-sofisticated corruption. This is also part of an ongoing shift to reliance on online banking and online services etc. There are some related, huge projects on a national level, aimed at promoting this. Of course, it also means tighter control and surveillance, and naturally will not come about without any hindrance (especially relevant to rural areas and communities):

 

India abolishes larger banknotes in fight against graft, 'black money'

http://www.reuters.com/article/us-india-modi-corruption-idUSKBN1331WT

 

India scraps high currency notes overnight to fight graft

http://bigstory.ap.org/article/a3ff48a6ba5341e29f0689ce6cd277aa/india-scraps-high-currency-notes-fight-corruption

 

Aadhaar

https://en.wikipedia.org/wiki/Aadhaar

 

 

 

 

Man gets stopped on the road, police have him empty his pockets.

"You are having illegal banknotes, we must take them.  If you have more at home you must give those to us as well."  A very good time to be a policeman in India, our BiB will be jealous.