Indian Government Voids 500 & 1000 Rupees Notes
In a surprise announcement early November this year, Narendra Modi the Prime Minister for India, declared that the 500 and 1000 rupees notes would be made redundant as at midnight that night. This forms part of a strategy to clamp down on the bustling black money market in India. People have been given till the end of 2016 to deposit notes of 500 and 1000 rupees.
The Chaos Begins
Whilst it was urged that people do not rush to the bank naturally queues formed for miles down the road at every bank the following morning. It is now mid December and the situation has not calmed with queues still miles long and citizens worried they will be left short. Unfortunately you cannot simply attend a bank and deposit the notes. You will need proof of ownership via a receipt or transaction statement. Any form of document that evidences how you obtained the cash. Unfortunately if you happen to have no evidence or are in possession of fraudulent notes you will be left short.
I just happened to return to India at the wrong time. I wish I had purchased some rupees before arriving however then again I am glad that I did not. As I would be left short if I was given old currency before the announcement was made. At the airport the foreign exchange counters had queues miles long. ATM's also do not have any cash so I cannot withdraw any funds and businesses do not accept foreign credit cards. Therefore I am totally reliant on my husband's family who have also been impacted.
Most locals here keep their cash at home, which is one part of the strategy to clear out tax evaders. But these people are only simple farmers and do not earn much to begin with. So does this strategy actually help them? My father in law will leave first thing in the morning to go and queue at the bank all day only to return home with 2000 rupees cash which is equivalent to $40AUD. That is the maximum amount of cash a person can withdraw per day at the moment. Whether it be via the bank, ATM, Foreign Exchange Desk and Western Union. It is extremely difficult to obtain cash and is a very slow process.
The New 500 & 2000 Rupees Note
In replace of the old currency notes a new 2000 rupees note has been circulated. I happened to have $50 left in my wallet when I arrived and had this exchanged. I received a 2000 rupees note and 5 x 100 rupees notes. Now the dilemma here is how can one use this currency with ease as buying fresh vegetables only costs 10 rupees. If you were to hand this new currency over to the local fruit & vegetable stall they would refuse to do business. As that is an absurd amount of change to hand over in 100 rupees notes. Carrying a 500 rupees note was convenient as it meant not needing to carry 5 x 100 rupees notes and still receive change without a hassle.
The new 500 rupees note was also circulated though given it is more frequently used than larger denominations, there was very soon a shortage. You can see what the new notes look like in the below images.
Why Remove The Old Currency So Suddenly?
As part of the strategy to clean up the black money market, whilst it is inconvenient it prevents any black money in circulation from being cleaned. Whilst this may have cleaned up billions of dollars in black money. I am unsure how this will prevent the problem. It seems like it will only exacerbate the situation with more citizens evading taxes and hoarding smaller denominations at home and money launderers continuing to do what they do.
What Does This Mean For Me As A Tourist?
The impact of the sudden withdrawal of the 500 and 1000 rupees notes will be long lived, with the circulation of the new note taking time to produce and majority of businesses not accepting foreign credit cards. Not to mention the lack of cash in stock is limited and therefore the withdrawal limit will not likely be removed anytime soon. So you should be prepared if you are travelling to India in the near future. Here are my suggestions to surviving:
1. Pay for as much accommodation and travel as you can online before you arrive. Particularly if you are travelling to rural regions as foreign credit cards are not accepted.
2. Purchase foreign currency before you depart but ensure that you do not receive any redundant rupees notes. The foreign exhange desks have the same issue where you will only receive a maximum of 2000 rupees converted.
3. Have cash wired through Western Union if you are stranded with no cash in India. You can only receive a maximum of 2000 rupees in cash per transaction and the rest will be issued as a cheque. For desperate situations 2000 rupees will probably get you by however not being a local you will find a cheque useless.
4. Carry multiple debit cards in the event you are lucky enough to find an ATM with cash however this is very unlikely. Though if you do locate one you can withdraw cash from each card to your daily limit set by your financial institution. This will save you looking for any further cash later in your travels.
5. Do NOT accept 2000 rupees notes unless you plan to make large transactions. Indian's deal in small denominations so you will most likely be turned down by many businesses if you hand them a 2000 rupees note. No one stocks that kind of change to hand over to every customer with a 2000 rupees note!
Hope this helps, safe travels!