India’s unprecedented decision to withdraw 500 and 1,000 rupee banknotes with immediate effect has taken many expatriates from the South Asian country by surprise, although they see it as a “bold” move to fight black money and fake bills.
In a televised address to the nation, Indian Prime Minister Narendra Modi last night announced demonetisation of `500 and `1,000 currency notes with effect from midnight November 8, making these notes invalid.
Modi said people holding notes of `500 and `1,000 denominations can deposit the same in their bank and post office accounts from November 10 until December 30 and get compensated during the 50-day period.
New `500 and `2,000 denomination notes will be issued later, the Indian leader added. Later yesterday, the Reserve Bank of India said new high-security 500 and 2,000 rupee notes will be issued from November 10.
“Black money and corruption are the biggest obstacles in eradicating poverty,” Modi said in his address to the nation.
Bankers and Indian expatriates contacted by Gulf Times last night said the Indian move was unprecedented, but the urgency with which the decision was implemented by the country’s government clearly indicated that it was part of a crackdown on rampant corruption.
Doha Bank Group CEO, Dr R Seetharaman described the Indian government decision as “very sensible” and said it would destroy the “parallel system” that was challenging the country’s otherwise robust economy.
“It will help unearth black money and cleanse India’s financial system to a significant extent. The decision to immediately withdraw 500 and 1,000 rupee banknotes will be a big blow to money laundering and terrorist financing as these are done using physical cash,” Seetharaman pointed out.
“Indian economy is on ‘strong fundamentals’ and is among the ‘fastest growing’ in the world. That value will further get enriched by the India government decision,” the Doha Bank CEO said and noted that the Indian rupee would get further strengthened in the coming days.
At the same time, he said the gold and real estate markets would be impacted because of the Indian decision on immediate withdrawal of 500 and 1,000 rupee banknotes.
K V Samuel, a former senior banker said the Indian government move on currency withdrawal would strengthen the country’s economy and help it curb unaccounted money.
He said he did not think that Indian expatriates would have a mechanism in Qatar to get their invalid currencies of `500 and `1,000 exchanged.
“It is illegal to trade in on Indian rupee outside of the country,” he explained.
He suggested this would have to be done through their banking channels in India.
Hospitals and transport operators would continue to accept old 500 and 1,000 rupee notes for payment for the next 72 hours.
They would also be accepted at gas stations run by public sector oil companies, and at milk booths, crematoriums and burial grounds.
ATMs and banks would be closed today and some ATMs would also be closed on Thursday.
K N S Das, general manager, Trust Exchange welcomed the India government decision and said it would certainly go a long way in combating black money and fake currency in the South Asian country.
Currently, Indian economy is the third largest in Asia, seventh largest in the world measured by nominal GDP and the third-largest by purchasing power parity (PPP). This year the Indian economy sized $2.25tn in nominal terms and $8.72tn by PPP.
Since 2014, Indian nationals including non-resident Indians (NRIs) are legally allowed to carry with them up to `25,000, when they exit the country.
A report showed that in value terms, `500 and `1,000 notes together accounted for 86.4% of the total value of notes in circulation in India. And for this reason, it is believed that fake currencies in the market are mostly in `500 and `1,000 denominations.
Many quarters in India have been demanding withdrawal of `1,000 and `500 denomination notes to prevent hoarding of black money.
A Reuters dispatch said yesterday’s announcement came just over a month after the government raised nearly $10bn through a tax amnesty for Indians to declare hidden income and assets.
A report by Washington-based think-tank Global Financial Integrity estimated that India lost $344bn in illicit fund outflows between 2002 and 2011.
Reuters also said the surprise step appears designed to bring billions of dollars worth of cash in unaccounted wealth into the mainstream economy, as well as hit the finances of Islamist militants who target India and are suspected of using fake 500 rupee notes to fund operations.