The Central Board of Directors of the Reserve Bank of India (RBI) has recommended that bank notes in the Rs500 and Rs1,000 denominations of the existing series be made worthless. As of 9 November they stopped being legal tender, and all ATMs, cash deposit machines, cash recyclers and other machines used for receipt and payment of cash are shut on
9 and 10 November, 2016. Bank branches and government treasuries are open on 10 November, however.
The Indian government has explained that it has been difficult to easily identify genuine bank notes from fake ones and that the use of fake currency notes is affecting the economy adversely. The total number of bank notes in circulation rose by 40% between 2011 and 2016. Strangely enough, there was a 76% increase in the number of Rs500 notes and a 109% increase for Rs1,000 notes during this period. Another reason for the move is the loss of taxes from the practice of storing high-denomination bank notes as "unaccounted wealth".
The government further said that the old notes will be exchangeable for new ones. New series bank notes in the same denominations will be introduced for circulation from 10 November, 2016. The addition of Rs2,000 bank notes will be monitored and regulated by RBI. The new banknotes which be different from the current ones in terms of look, design, size and colour, the government said.
The Indian government has explained that it has been difficult to easily identify genuine bank notes from fake ones and that the use of fake currency notes is affecting the economy adversely. The total number of bank notes in circulation rose by 40% between 2011 and 2016. Strangely enough, there was a 76% increase in the number of Rs500 notes and a 109% increase for Rs1,000 notes during this period. Another reason for the move is the loss of taxes from the practice of storing high-denomination bank notes as "unaccounted wealth".
The government further said that the old notes will be exchangeable for new ones. New series bank notes in the same denominations will be introduced for circulation from 10 November, 2016. The addition of Rs2,000 bank notes will be monitored and regulated by RBI. The new banknotes which be different from the current ones in terms of look, design, size and colour, the government said.
Under the new rules:
Read the FAQs at the RBI website
Read the notifications at the Finance Ministry website
- Old notes may be deposited by
individuals into their bank accounts and/or exchanged in bank
branches or Issue Offices of the RBI till the close of business hours on
30 December, 2016
- Old notes totalling Rs4,000 or below in value can be exchanged by an individual at any bank branch or Issue Office of RBI for any denomination of bank notes having legal tender character, provided a requisition slip (format to be specified by RBI) is presented with proof of identity along with the notes. Similar facilities will also be made available in post offices. The limit of Rs.4,000 for exchanging notes at bank branches or at RBI issue offices will be reviewed after 15 days.
- There will not be any limit on the quantity or value of old notes to be credited to a bank where the individual has an account, at any bank in accordance with standard banking procedure and on production of valid proof of identity. However, in accounts where compliance with extant 'know your customer' (KYC) norms is not complete, a maximum value of Rs50,000 of old high-denomination notes may be deposited.
- The value of the old notes can be credited to a third-party account, provided specific authorisation therefor accorded by the said account holder is presented to the bank, following standard banking procedure and on production of valid proof of identity of the person actually tendering.
- Cash withdrawal from a bank account over the counter will be restricted to Rs10,000, subject to an overall limit of Rs20,000 per week for the first fortnight, until the end of business hours on November 24, 2016.
- Withdrawal from ATMs is restricted to Rs2,000 per day per card up to November 18, 2016. The limit will be raised to Rs4,000 per day per card from November 19, 2016 onwards.
- There will be no restriction on the use of any non-cash method of operating the account which will include cheques, demand drafts, credit/debit cards, mobile wallets and electronic fund transfer mechanisms.
- For those who are unable to exchange their old high-denomination notes or deposit them in their bank accounts on or before December 30, 2016, an opportunity will be given to them to do so at specified offices of the Reserve Bank of India (RBI) on later dates along with any documentation specified by RBI.
- The affected notes will continue to be accepted at government hospitals and pharmacies in these hospitals; railway ticketing counters and ticket counters of government/public sector outlets handling buses and airline ticketing counters at airports; for purchases at consumer co-operative societies, at milk booths, at crematoria/burial grounds, at petrol/diesel/gas stations of public sector oil marketing companies; for arriving and departing passengers at international airports and for foreign tourists to exchange foreign currency at airports up to a specified amount.
Read the FAQs at the RBI website
Read the notifications at the Finance Ministry website
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