Indians have until the end of December 30 to deposit discontinued 500 and 1,000 rupee notes in bank and post office accounts, or risk their money becoming worthless.
Last month, the Indian government scrapped the 500 and 1000 rupee notes to crack down on undeclared money and fake cash.
The move divided opinion, especially over how the ban was implemented.
Deadlines for spending the notes or swapping them for new currency have already passed.
Some people, including those of Indian origin living abroad, will be able to exchange the notes in branches of the country’s central bank until March 31, 2017 – but the process will be more complicated than going to a regular bank.
Image source Reuters
Parliament is preparing laws that will make it a criminal offence to hold the old notes from April 1, 2017 onwards.
PM Narendra Modi announced that the notes were no longer legal tender on November 8, sparking panic.
Together the 500 and 1,000 rupee notes represented 86% of the currency in circulation and there have been chaotic scenes in India ever since, with people having to spend hours queuing outside banks and cash machines which have been running out of money.
ATM queues and cash withdrawal limits mean getting currency can still be tricky, and there have been several changes of the rules around how much money people can access or deposit.
India’s government hopes the measures will encourage more people to have bank accounts and move towards a society less reliant on cash.
However, there are concerns that many poorer people and those in rural areas have yet to get bank accounts.
Local companies which allow people to make digital payments both online and in stores have reported a surge in transactions as people look for cashless alternatives.
The government says the move has been a success with the banks flush with cash and significant increases in tax collection.
However, critics argue the move has failed to root out corruption and unearth illegal cash, since most of the money in circulation has been put back into the financial system. Instead, they say, the economy, which was growing at a rapid pace, has slowed down significantly.
Thousands of Indians have demonstrated in a number of cities against the government’s ban on two major currency notes.
Earlier this month, the 500 and 1,000 rupee notes were banned overnight, causing chaos as people lined up at banks to exchange their old currency.
India’s PM Narendra Modi has defended the decision saying it was an anti-corruption measure.
However, opposition parties say the move was mishandled.
Last week, they stalled parliament and demanded Narendra Modi should apologize for the decision.
Image source Reuters
Correspondents say it is unclear how much public momentum a day of protests will generate as many Indians have supported the move, despite the inconvenience it has caused them.
Most opposition parties said they would participate in the so-called “day of rage”.
A number of important regional leaders – like the chief ministers of Bihar and Orissa – refused to back the protests, saying Narendra Modi’s attempts to curb corruption should be welcomed.
Protest rallies have been held in the cities of Lucknow, Kolkata and Bangalore.
The southern state of Kerala and the eastern state of Tripura, both ruled by the Communists, saw a near total shutdown.
“We are protesting against the undeclared financial emergency imposed by the government and the hardships people across the country are facing because of this illegal decision,” Manish Tiwari of the Congress party told the AFP news agency.
“The decision to demonetize high-value currency was done without any authority and legislation and is clearly illegal.”
About 90% of India’s transactions are in cash and many people do not have a bank account. The two banned notes accounted for about 86% of the cash in circulation.
In his first national address since the government banned the notes, Narendra Modi called on November 27 for people to embrace digital payments and use less cash.
Last week, former PM Manmohan Singh said the government’s move to ban the much-used banknotes was “monumental mismanagement”, and that India’s gross domestic product would fall “by about 2%” because of the move.
Narendra Modi announced that 500 and 1,000 rupee notes were no longer legal tender as part of a crackdown on corruption on November 8.
There have been chaotic scenes in India ever since. People have spent hours queuing outside banks and cash machines which often run out of money.
In some instances the police have had to be called in to manage queues of anxious customers trying to access legal tender.
Indians have queued up outside banks across the country to exchange 500 and 1,000 rupee notes after they were withdrawn as part of anti-corruption measures.
People will be able to exchange their old notes, which stopped being legal tender at midnight on November 8, for new ones at banks until December 30.
The surprise move is part of a government crackdown on corruption and illegal cash holdings.
Banks were shut on November 9 to allow them enough time to stock new notes.
There are also limits on cash withdrawals from ATMs.
Image source The Hindu
There were chaotic scenes outside banks in Mumbai and Delhi.
Some banks extended working hours to deal with the rush, and have hired extra staff on a temporary basis.
Meanwhile, Indian social media has been talking of little else.
The top trend on Twitter India has been #CashCleanUp with tweets ranging from the frustrated to the humorous, as many people came to terms with the fact that much of their day would be spent in queues.
New 2,000 (about $30) and 500 rupee denomination notes with new security features are being given to people to replace those removed from circulation.
A new 1,000 rupee note “with a new dimension and design” will also be introduced in due course, a senior government official said on November 10.
The government’s move is designed to lock out money that is unaccounted for – known as “black money” – which may have been acquired corruptly, or is being withheld from the tax authorities.
Finance Secretary Shaktikant Das warned people with large amounts of hidden cash that banks would closely monitor the exchange of old notes for new ones.
According to the government, the move will flush out tax evaders and that all old notes deposited in banks will be subjected to tax laws.
According to Indian Finance Minister Arun Jaitley, “honest people” have no need to worry about a decision to withdraw 1,000 and 500 rupee notes from circulation.
Arun Jaitley said the move would flush out tax evaders, adding that all old notes deposited in banks would be subjected to tax laws.
The surprise move, announced on November 8, is part of a crackdown on corruption and illegal cash holdings.
The announcement was met with shock in India.
Media described the move variously as a “surgical strike” on tax evaders in India’s overwhelmingly cash-based economy and a “big bang note”. The banknotes declared illegal tender represent 85% of cash in circulation in India.
Image source Reuters
Arun Jaitley said that the move would also help India move towards a cashless economy, saying that farmers could “now keep their money in banks”.
He added that new 2,000 (about $30) and 500 rupee denomination notes to replace those removed from circulation would be injected into the economy over the next “three to four weeks”.
On November 8, there were long queues at ATMs as people tried to withdraw 100 rupee notes, which are still legal.
Banks and ATM machines were shut on November 9.
The most affected are likely to be small traders, vendors and laborers but newspapers were quick to point out that India’s wedding season, due to start in a few days, will also be hit hard.
“Black money and corruption are the biggest obstacles in eradicating poverty,” PM Narendra Modi said in his address to the nation on November 8.
The prime minister said the move would “cause some hardship” but asked people to “ignore” it, calling the step a “celebration of honesty”.
People will be able to exchange their old notes for new ones at banks over the next 50 days but they stopped being legal tender at midnight on November 8. There are also going to be limits on cash withdrawals from ATMs starting on November 10.
The move is designed to lock out money that is unaccounted for – known as “black money” – which may have been acquired corruptly, or be being withheld from the tax authorities.
Finance Secretary Shaktikant Das warned people with large amounts of hidden cash that banks would closely monitor the exchange of old notes for new ones.
The 500 and 1,000 rupee notes are the highest denomination notes in India and are extremely common in India. Airports, railway stations and hospitals will only accept them until November 11. People will be able to exchange their money at banks between November 10 and December 30.
Government guidelines say it is possible to exchange 4,000 rupees – but it is not clear if this is per day or in total. If there is a legitimate explanation for the cash, the authorities say, it will be possible to exchange it.
Indian rupee and stocks have jumped a day after the country’s new central bank chief Raghuram Rajan took charge and promised tough action to boost growth.
The Indian currency, one of the world’s worst performers this year, rose 2.3% against the US dollar.
India’s main stock index, the Sensex, rose 2.3% in early trade on Thursday.
On Wednesday, Raghuram Rajan unveiled a series of measures aimed at propping up the currency and liberalizing the country’s banking sector.
“To a certain extent, the recent rupee tumble and instability in the financial markets has been a crisis of confidence,” said Radhika Rao, an economist with DBS Bank.
“To that end, the path of action provided by the new governor and the stress on keeping communications predictable and consistent will be a welcome move.”
One of the biggest issues facing the Indian economy has been the sharp decline in the rupee.
Raghuram Rajan unveiled a series of measures aimed at propping up the currency and liberalizing India’s banking sector
The Indian currency has dipped nearly 20% against the US dollar since May, as international investors pulled out money from the country.
The pull-out has been triggered by a range of factors, including slowing economic growth and a lack of key reforms. At the same time, a recovery in the US economy has also made India a less attractive option for investors.
India’s central bank has taken some steps to try to maintain the rupee’s value and also shore up confidence in the economy.
However, these measures, which include increasing duty on gold, imposing capital controls and raising short-term interest rates, have failed to have any significant impact.
When he took charge, Raghuram Rajan announced that some of the actions that he would take to tackle the issue “will not be popular”.
“The governorship of the central bank is not meant to win one votes or Facebook <<likes>>. But I hope to do the right thing, no matter what the criticism, even while looking to learn from the criticism,” he said.
Raghuram Rajan’s statement has helped to restore confidence, with the Indian currency rising more than 2% to 65.53 rupees against the US dollar on Thursday.
He also unveiled steps aimed at opening up the country’s banking sector.
Under the new rules, Indian banks will no longer have to seek the central bank’s approval for each branch they want to open.
However, the banks will be obliged to open branches in rural areas – in proportion with their expansion in the cities – in order to extend financial services to all areas of the country.
The central bank will also issue new banking licences, beginning next year.
Raghuram Rajan added that the central bank would also look at easing the requirement for banks to invest in government bonds, to free credit for productive parts of the economy.
Analysts said the moves indicated that Raghuram Rajan would take concrete steps to tackle the issues facing the country.
According to Indian government’s latest figures, the country’s economy continues to slowdown in Q2 2013.
For the April-to-June quarter, India’s economy grew at a rate of 4.4%, compared with the same period in the previous year.
It was a weaker performance than most economists had been expecting and was a slowdown from the first three months of the year, when growth was 4.8%.
A contraction in mining and manufacturing activity was behind the slowdown.
Friday’s figures show the economy is now expanding at the slowest rate since 2009.
“We do not wish to sound alarmist, but concern on the economy can hardly be overstated,” said Chandrajit Banerjee, Director General, Confederation of Indian Industry, in reaction to the latest figures.
“The economy needs the undivided attention of policy makers,” she said.
India’s economy continues to slowdown in Q2 2013
It adds to the pressure on Indian PM Manmohan Singh, who earlier addressed parliament over the nation’s economic problems.
In his statement to parliament, made before the figures were released, the prime minister said India was not facing a repeat of the crisis in 1991.
Back then, India’s foreign currency reserves became so depleted that it had to borrow from the International Monetary Fund to pay its import bills.
“Growth will pick up in the second half, barring extreme unforeseen eventualities,” the prime minister said.
He also said that a strong monsoon would boost harvests and help reduce food inflation.
Manmohan Singh was also keen to reassure the nation over the falling value of the Indian rupee, saying it was “a matter of concern”.
The rupee hit a record low against the dollar on Wednesday and has fallen more than 20% this year.
That fall is damaging for the economy, as India imports large amounts of fuel and foodstuffs and the weak rupee makes those imports more expensive.
Manmohan Singh said: “Clearly, we need to reduce our appetite for gold, economize [on] the use of petroleum products and take steps to increase our exports.”
He also blamed the fall in the rupee on “external” factors.
The prime minister highlighted the impact of developments in the US, where the economy is improving and officials at the central bank have started to talk about cutting back on stimulus measures.
“In a more equitable world order, it is only appropriate that the developed countries – in pursuing their fiscal and monetary policies – should take into account the repercussions on the economy of emerging countries,” Manmohan Singh said.
The Indian government has raised the import duty on gold and increased deposit rates to stem the outflow of money.
The Indian rupee has hit a new all-time record low against the US dollar, amid concerns the Federal Reserve will soon scale back its stimulus measures.
It dropped to 64.13 against the US dollar in early trade on Tuesday.
Foreign investors have been pulling money out of India, as the economy has slowed and the cost of borrowing in dollars has risen.
The Reserve Bank of India (RBI) is rumored to have intervened to stem the slide in the currency.
The Indian rupee has declined by nearly 16% against the US dollar since May and is Asia’s worst performing currency so far this year.
Its further decline on Tuesday was mirrored by falls in markets across other developing markets, particularly in Asia.
On Tuesday, Japan’s Nikkei 225 index fell by 2.6%, Hong Kong’s Hang Seng was down 2.2% and South Korea’s Kospi dropped by 1.6%.
The Indonesian stock market fell 4.9% on Tuesday, pushing it into a formal bear market – meaning it has fallen by more than 20% since its last peak.
Minutes from the Federal Reserve’s latest meeting are due to be published on Wednesday, and may set out more details about the rollback of its “quantitative easing” stimulus programme.
The Indian rupee has hit a new all-time record low against the US dollar, amid concerns the Fed will soon scale back its stimulus measures
The Fed is expected to start slowing the rate of its purchases of government debts with newly-created money from next month.
Another source of concern in India is the country’s widening current account deficit.
The current account deficit is a broader measure than the trade deficit, and includes cross-border income flows on investments.
As well as weakening the currency, the deficit can also act as a drain on the central bank’s foreign currency reserves, and suggests that the Indian economy as a whole needs to borrow more money from abroad.
Meanwhile, the Indian government has been attempting to stem the tide of investor money leaving the country by imposing capital controls.
The combination of all these factors has sparked comparisons to the financial crisis that India faced in 1991. In July that year, the rupee eventually fell by more than 32% against the US dollar after foreign exchange reserves were depleted.
On that occasion, the country had to be rescued by the International Monetary Fund (IMF).
“Weakness concentrated in the Brazilian real and Indian rupee makes sense, as these are current account deficit economies with limited ability to defend their currencies,” said Bank of Singapore’s chief economist Richard Jerram.
“India is in worse shape than Brazil, with few viable policy responses.
“Capital controls in India are not likely to have much impact and there is the risk that a [credit] ratings agency downgrade leads to further currency weakness.”
Over the weekend, Indian PM Manmohan Singh tried to calm fears that India was facing another currency crisis.
Manmohan Singh said that back in 1991, the country only had enough foreign currency reserves to cover the country’s borrowing needs for 15 days, while currently it has reserves equivalent to six to seven months.
“So there is no comparison. And no question of going back to [the] 1991 crisis,” Manmohan Singh told the Press Trust of India.
International investors have withdrawn $11.58 billion in shares and debt from India’s markets since the beginning of June, according to official data.
India, which is Asia’s third-largest economy, grew at an annual rate of 5% in the 2012-13 financial year, the slowest pace in 10 years.
India’s rupee has hit a record low against the dollar despite recent efforts to prop-up the currency.
On Wednesday India’s central bank put further restrictions on the amount of money that companies and individuals can send out of the country.
That had little impact and the rupee fell to 62.03 to the dollar, below its previous low of 61.80 hit on August 6.
Rupee has hit a record low against the dollar despite recent efforts to prop-up the currency
Overseas investors have been pulling money out of Indian shares and debt on concerns over the economy.
According to official data, international investors withdrawn $11.58 billion in shares and debt from India’s markets since the beginning of June.
India’s economy had been growing at a fast clip, reaching annual growth of 9%.
In recent months, it has seen a sharp decline largely because of a slowdown in its manufacturing and services sectors.
“There is a complete lack of faith in the markets. There are fears that the RBI [Reserve Bank of India] measures may not help improve the rupee,” said Param Sarma, chief executive with NSP Forex.
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