You would have caught it on the news or you would have at least heard about it from a friend.
But one thing’s for sure: news of the currency demonetisation in India is big, and won’t be going away overnight as the horrors of invalid INR500 and INR1,000 notes cripple the country, its citizens and expatriates living around the world.
But who is to blame for this rapid demonetisation of currency notes in India?
Is it the government? Is it money-hoarding businessmen who were stocking up piles of rupees as black currency (income illegally obtained or not declared for tax purposes)? Above all, who has this affected?
Y talks to a range of people from India as well as a number of expatriates settled in Oman to find out how the ruling has affected them and what they are doing to overcome it. We also talk to agents who convert black money to white (currency that is legally accounted for), banks and money exchanges in India and Oman to get their take on the situation.
Sanjana Kuriakose is a mother of three children and a housewife from the evolving city of Bengaluru, in the southern state of Karnataka, India. She was at home on the night of November 8 when the news of demonetisation spread across the country.
The time was 9.20pm and for 42-year-old Sanjana, there was still some evening left to enjoy. Her husband Cijin had just come home from work, and it was their usual time (“tradition” as she calls it) to kick back and talk about how their day had been.
“Nothing was unusual about our night,” she jokes. “I am a huge fan of soaps, and hence, the television was tuned into Zee TV. But as soon as Cijin came home, I switched the television off as he really doesn’t like being bombarded with television soaps after work.
“But he came in and instead of our usual chit-chat over dinner, he ran into the living room to switch on the television.
“It was so odd. The last time he did something like that was when the Malaysian flight went missing, and he was intrigued about its whereabouts.
“He tuned right into NDTV [a local news channel] and simply sat there expressionless. I had no idea what was going on and therefore sat along with him. And after the news flash, I noticed that he had a smile on his face. He seemed happy.
“It was only then that I realised what was going on. It was a re-telecast of Prime Minister Narendra Modi’s speech on the financial future [demonetisation of currrency] of the country. But I didn’t pay any heed,” she says.
What Sanjana had witnessed, and ignored, was the demonetisation of the Rs500 and Rs1000 banknotes in the country – the first of its kind in nearly 40 years.
“The 500 and 1,000 rupee notes hoarded by anti-national and anti-social elements will become just worthless pieces of paper,” said Prime Minister Modi in his official statement to the nation.
“The rights and the interests of honest, hard-working people will be fully protected,” he added.
The announcement was followed by a flurry of instructions, which stated that citizens would be able to exchange their old notes worth up to INR4,000 daily at banks and Reserve Bank of India counters until December 30, 2016.
Mr Modi also promised to review the daily limit after a period of 15 days.
Following this, the Reserve Bank of India (RBI), India’s central banking institution, which controls the monetary policy of the Indian rupee stated: “The Reserve Bank appeals to members of public to be patient and urges them to exchange their old notes at their convenience, any time before December 30, 2016.”
Meanwhile, hospitals, pharmacies, railway ticket counters, public business, co-operative milk booths, crematoriums, petrol pumps, and airline ticketing counters at airports were all allowed to accept old notes for the next three days, after which they would accept only new notes.
Sanjana says: “Initially, my husband was extremely happy with the news. He said that it would really help crack down on illegally obtained money [black money]. And he also asked me to take our savings, approximately INR250,000 [RO1,457] in cash down to our local Union Bank of India and deposit it.
“Even I approved of what my husband had said. I thought it would be quite a good thing to have all our money deposited in the bank so that we didn’t have to wait in the ATM queues that had been forming up at every bank.
“But to my horror, that’s not what happened. Each and every bank was crowded, and people were forming lines that were more than 100 strong. People were sitting down on newspapers they had brought from their homes and some were even lying down on them. It was a sad sight, to say the least.
“Waiting in the queues were people of all ages, starting from kids acting on behalf of their parents and also the elderly who were waiting to cash in their pension cheques.
“It took me a total of four-and-a-half hours before I could even get to see the counter. After that, I was able to declare the currency using my PAN card [permanent account number]. I was also asked how I had procured so much money, to which I simply said that they were my savings.
“But the bank manager was called in, and I had to explain the source of my income, and how I had so much money in hand. They also did a run through their systems for my tax trails, and also had to call up Cijin to enquire about his job status and salary.
“In all, it took me six hours to finally get away from the deposit counter. But now we don’t have any currency at hand, and we’re forced to use the money that we have deposited in the account,” says Sanjana.
“What I saw that day in the queue really opened my eyes to what’s going on. Most of the people standing in line didn’t even have debit or credit cards, let alone a bank account.
“What basically started off as a ruse to track black money hoarders, has come back to sting us,” she says.
Officials from banks and money exchanges in India and Oman are assessing the gravity of the situation.
Sanjeev (who declined to give his surname), a bank official from the State Bank of India, from Kerala, says: “The number of people coming in to deposit their money is beyond what we could even imagine.
“The reason for such confusion is because a lot of people don’t even have bank accounts. Only half of the country’s adult population have bank accounts, and most of them prefer keeping cash at hand. So they are bound to be hit quite hard. I have been dealing with numerous residents coming in with more than 10 lakh upees [RO5,602]. In such cases, we have to identify them clearly using their PAN card, and use that to determine whether they are taxpayers or not.”
However, Jacob Palamootil, a training manager at the Oman UAE Exchange in Muscat, seems to support the cause.
He says: “I see a good future in this move by Narendra Modi.
“I already see a huge drop in real estate prices in India, and bank interest has also gone down drastically. So definitely we are on the right track.
“There are currently four printing presses for currency in India, and they are working at full strength to ensure that the citizens do not lose out. Nobody here in Oman has come to me and complained that they have had any issues or their families have had any serious issues back home.
“To an extent, a lot of the confusion and the stories about how the demonetisation has been affecting normal people’s lives have been exaggerated.”
Addressing the negative comments about the currency demonetisation, Jacob says: “The truth is that, there are a lot of people stocked up with money [black money].
“If people have stacks of money stuck in their hands, they would definitely be frustrated and that [frustration] can be expressed in many ways. And I believe all the hype and the confusion has to be cthe ause of the frustration being expressed by these people.
“For instance, my wife and mother were standing in queues for a couple of days. But for a good cause and a good future.
“There’s no need to complain about standing in a queue for a while. Even they realise that so they’re not complaining much.
Meanwhile, talking about the stockpile of rupees at foreign exchanges in Oman, Jacob adds: “We are holding some Indian currency. It is not a huge amount but the RBI will come up with a solution and I would suggest that the RBI set up a single point of contact at every GCC country to avoid any misunderstanding among Indian expatriates in Oman.
“For instance, there was hoax news that the Oman UAE Exchange was authorised to buy and exchange old currency notes. That caused a lot of confusion among the public so we had to rectify that news immediately.”
Meanwhile, another branch manager from a money exchange in the Sultanate, who declined to be named says: “Sure, this sudden demonetisation did come as a surprise to us. But since we do not hold a lot of Indian rupees as stockpile, we aren’t very worried.
“Moreover, the reports that Indian expatriates are putting off their plans to travel home for Christmas and New Year citing the lack of Indian currency are also not true.
He explains: “The INR500 and INR1000 notes constitute 86 per cent of the total currency that was in circulation. So in such an eventuality many people did get affected. But the RBI is issuing notes at quite a pace. Moreover, people travelling back home can actually receive the new notes in currency exchange stalls in the airports.
“But I did have a couple of people come up to me and ask me if I could exchange huge amounts of money or if I had someone in India who could do that for them. I had to raise my voice against them,” says the manager.
“A lot of people, however, are using the currencies to purchase gold, and a lot of these dealers are using this as an opportunity to make some extra money.”
According to the manager, local jewellery showrooms in India have been selling gold at 20 per cent of the original value of the metal.
“If you were purchasing gold at INR100,000 [RO560], you would essentially be paying INR120,000 [RO672].
“These sellers would then have them exchanged at the banks via agents. And a lot of NRIs (non-resident Indians) are opting for this method if they have stockpiles of unaccounted money in India,” he explains
A person who buys jewellery has to give his PAN number. We are issuing instructions to the field authorities to check with all jewellers to ensure that this requirement is not compromised.
“Action will be taken against those jewellers who fail to take PAN numbers from
such buyers. When the cash deposits of the jewellers are scrutinised against the sales made, we will check whether they have taken the PAN number of the buyer or not.
Meanwhile, tipped off by an anonymous source, Y also got in touch with a trader who claimed to “exchange black money to white money”. We approached the trader, a 23-year-old youngster, through the online chat service WhatsApp.
We posed as an NRI with INR1 crore (RO56,032) in unaccounted and defunct bills. The trader followed up with us, stating that he would charge an extra fee of 25 per cent.
Stated below is our conversation:
Y: Dear Mr. Sree (name changed), I have 1 crore rupees in black and would like to convert it for the new currency.
Sree: Hi Y, that’s ok. I will need to know where the money is. I can only help u (sic) if the money is in Guntur (Hyderabad).
Y: No issues!
Sree: Processng (sic) fee is 25 per cent
Y: So how will this work?
Sree: I have somebody who works with a bank here. That’s all you need to know. I’m not going to ask u (sic) any questins (sic). So I xpect (sic) the same from u (sic).
Y: Ok! So can I get it in new notes?
Sree: Tht (sic) all depends on my friend. It’s not my first time, ok?
Y: Sure, I’ll get back to you as soon as I get the money in Guntur.
(Sree doesn’t respond to the message.)
According to a recent statement issued by the RBI, the old notes can now “only be deposited in bank accounts” and not exchanged. Therefore, the trader’s services would most likely have been shut down following the announcement.
The government had earlier said that old notes worth up to INR4,000 could be exchanged at banks and RBI counters till December 30. However, now only foreigners are allowed to exchange notes up to INR5,000 per week.
And back to our question: who is really affected by the demonetisation? We may still be too early into our investigation, but according to the results procured from a recent online survey promoted by the Prime Minister himself, 92 per cent of the 500,000 people who responded said that the decision to demonetise the currency was “very good” or “good”.
Backing up his statement was RBI chairman, Urjit Patel, who says: “People have asked why the new currency introduced was different in size and thickness from the old. This is because the new currency has been designed to make it hard to counterfeit. When you are going to make a change of this magnitude, you need to get the best standards in place.
But, following the demonetisation, India’s post offices have recorded a total collection of about INR32,631 crore in deposits – a huge increase in comparison to collections from previous years.