This article has been written by Ishaan Garg. Ishaan is currently a student in Vivekananda Institute of Professional Studies, GGSIPU.
On November 8 2016, an announcement was made by the Prime Minister of India, Shri Narendra Das Modi which shook the entire nation. In an unscheduled live televised address to the nation at 20:15 IST, he declared that circulation of all Rs. 500 and Rs. 1000 banknotes as invalid and withdrew the status of legal tender from them. He announced the issuance of new Rs 500 and Rs 2000 banknotes in exchange of the old notes.
After the official announcement by Prime Minister Modi, the Governor of the Reserve Bank Of India, Mr. Urjit Patel and Economic Affairs Secretary, Shaktikanta Das explained in a press conference that while the supply of notes of all denominations had increased by 40% between 2011 and 2016, the Rs500 and Rs 1000 notes increased by 765 and 1095 respectively in this period mainly owing to their forgery. This forged cash was then used to fund terrorist activities against India. As a result the decision to eliminate the notes had been taken. Patel also informed that the decision had been made about six months ago and the printing of new notes of denomination Rs.500 and Rs.2000 had started few months back. However, owing to the nature of the matter, only the top members of the government, security agencies and the central bank were aware of the move. But if some reports are to be believed, media had reported in October 2016 about introduction of Rs.2000 denomination well before the official announcement by RBI. This statement has led to much debate, because the reserve bank governor six months before the announcement was Raghuram Rajan, while the new notes have the signature of the newly appointed governor, Urjit Patel.
The Reserve Bank of India laid down a detailed procedure for the exchange of the demonetised notes with new notes. The key points are:
- Citizens will have until 30 December, 2016 to exchange their notes at any bank or post office and deposit the old currency.
- Cash withdrawals from bank accounts were restricted to Rs10,000 per day and Rs20,000 per week per account from 10 to 13 November, 2016. This limit was increased to Rs 24000 per week from 14 November, 2016.
- For immediate cash needs, the old notes of value up to Rs 4000 per person could be exchanged for the new Rs. 500 and Rs. 2000 notes as well as Rs. 100 notes over the counter of bank branches by filling up a requisition form along with a valid ID proof. This limit was increased to Rs 45000 from 14 November 2016 onwards and then reduced to Rs. 2000 with effect from 19th November, 2016.
- Initially, all ATMs were dispensing notes of only Rs. 50 and Rs. 100 denominations and cash withdrawal of Rs. 2500 per day, while other ATMs dispensing notes of only Rs. 50 and Rs. 100 denominations will allow a maximum withdrawal of Rs. 2000 per day.
- Exceptions were given to petrol, CNG and gas stations; government hospitals; railway and airline booking counters; state-government recognised diaries and ration stores and crematoriums to accept the old Rs. 500 and Rs. 1000 notes until 11 November, 2016 which was later extended to 14 November, 2016 and now it is 24 November, 2016. International airports were also instructed to facilitate an exchange of notes amounting to a total value of Rs. 5000 for foreign tourists and outbound passengers.
In the past, the Bharatiya Janta Party (BJP) had strongly opposed demonetisation. But it was before Prime Minister Narendra Modi launched Jan Dhan Yojana to include the poor into the banking system. Finance Minister, Mr. Arun Jaitley said that demonetisation would clean the complete economy. He further said that this step would help to increase the size of economy and revenue base. He mentioned that the demonetisation along with the upcoming Goods and Services Tax (GST) as an attempt to change the spending habit and lifestyle.
This decision is both praised and criticised by the people of India. Several bankers like Arundhati Bhattacharya (CEO of SBI), Chanda Kochhar (MD AND CEO of ICICI BANK) and Deepak Parekh (Chairman of HDFC) appreciated the move in the sense that it would help curb black money. Businessmen Anand Mahindra (Mahindra group), Sajjan Jindal (JSW group), Kunal Bahl (Snapdeal and freecharge) also supported the move adding that it would also accelerate e-commerce.I nfosys founder Naryana Murthy also praised the move.
On the other hand of the spectrum, Chief Minister of West Bengal Mamata Banerjee along with Delhi Chief Minister, Arvind Kejriwal called the new declaration a “DRAMA”. A PIL was filed in Madras High Court by M Seeni Ahmed, General Secretary of Indian National League, to scrap the decision. However the High Court Dismissed the PIL stating that it cannot interfere in monetary policies of the government. Similar PILs were also filed in the Supreme Court of India. They too were rejected stating that the government is free to change policy, taking into consideration the prevalent socio-economic conditions and that the courts have only a limited role to play.
The November book bucket