Finance and Economics > Economic News, the Global Economy and all Things Monetary

Chaos as India eliminates two largest banknotes without warning

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Mr. Bill:
WSJ: India to Replace Largest Bank Notes


--- Quote ---In a surprise announcement Tuesday night, Prime Minister Narendra Modi said India will replace its largest-denomination bank notes with newly designed ones, a move aimed at curbing corruption, thwarting counterfeiters and dredging up what could be billions of dollars of taxable income currently stashed in the underground economy. ...

According to India’s central bank, 86.4% of the value of all rupee bills in circulation was in 500- and 1,000-rupee notes as of March. ...
--- End quote ---

The affected currency is the 500 rupee (US$7.50) and 1000 rupee (US$15) notes.

So:

* 86.4% of all cash in India can't be used anywhere (except at airports, railway stations, hospitals, crematoria, milk vendors, and possibly petrol stations for only the next 3 days).  Only the 100 rupee ($1.50) note and smaller are legal tender, until the new 500s and 2000s get distributed.
* Banks are closed for the next 1 or possibly 2 days.
* The old bills can be deposited at the bank, but cash withdrawals will be extremely limited.


More articles:

BBC: India scraps 500 and 1,000 rupee bank notes overnight

Times of India: ATMs run dry as people rush to draw Rs 100 notes; many decline banned notes

endurance:
Man, that is absolutely nuts. It's not like they're getting rid of the $500 bill. This is a country with a $6000 GDP/person average with a huge percentage living well below the poverty line. This seems like the kind of thing that could create a substantial disruption in civil order.

archer:
wow.... talk about sticking your hand into a hornets nest.

mountainmoma:
please keep us updated, something to watch, what if similar were to happen to Japan where many people are storing cash in house to keep from negative interest rates.... what if it were to happen here in the not to distant future ?

Are they going to limit how much can be exchanged ? Are they going to say you can exchange xx amount, no questions asked, and anything over, you need to prove you earned from declared income or we are going to assume under the table and tax ( effectively exchange at a discounted rate) ?

FreeLancer:
I saw the headline earlier today and figured it was equivalent to banning USD $100 and $50 bills, not like $20's and $5's.

A very large country has turned its economy into a monetary experiment and it will be very interesting to see how it turns out.  If it works there, we're probably all screwed. 



Wonder what this does for crypto and PM's?  China currency controls tend to send BTC prices up, but India wears its wealth in the form of 24k gold jewelry.

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