Scrapped Currency Notes Can’t be Deposited in Indian Banks in China

Prime Minister of India, Mr. Narendra Modi told about this initiative in his address to the nation on 8th November.

Analysts estimate India’s shock decision to scrap its 500 rupee and 1,000 rupee notes – accounting for about 86% of cash in circulation – will shave at least 1% (and possibly much more) off India’s current GDP growth rate of 7.1%.

Indians stand in a queue to deposit and exchange discontinued currency notes outside a bank in New Delhi. Modi made it as clear as possible in his reveal speech that the targets of this law will be the rich, not the middle or the lower classes.

Modi outlined this plan was – most importantly – an effort to devalue “black money”.

What do you think about the government’s moves to tackle black money in overall? This group argues that black money is not a stock but flow (kala dhannahidhanda), which can not be eliminated through a one-time strike.

Which bank will give a credit card to a homeless Indian living in a slum on $1 per day? Because the threat from their NPAs is so large, India’s banks have cut back their lending to India’s capital-starved and already overstretched business houses. To ease some of the pain, the Finance Ministry on November 21 said farmers could use old 500-rupee notes to buy seeds for winter-sown crops from state-owned stores.

“It’s not that easy to flush out black money”, he said after a speech, while he was still the country’s top banker. The new notes are too small for ATMs, and refitting the machines will take weeks. However, First Post reported that Indian banks in China will not accept the demonetized currency notes.

“They’re usually done in some kind of crisis situation and panic”, said Hanke, “and they ultimately have all kinds of negative unintended consequences”.

17 days into the demonetization upheaval long lines are still snaking out of banks, where people can only exchange the equivalent of $65 per day.

Plenty of Indians do use cash transactions to hide their wealth and avoid taxes – less than three per cent of the population pays income taxes – and the authorities occasionally arrest businesspeople or corrupt officials with currency hoards that can fill trucks.

In rural areas and in small towns where banks or even an exchange mechanism do not exist the effect has been nothing less than catastrophic, with people unable to purchase daily necessities such as food and fuel.

By compelling cash-holders to deposit their funds into the bank, the government is also hoping to collect a tax windfall so as to help plug its large fiscal deficit. This government is dedicated to the poor.

Prasad explained how 500 and 1,000 rupee notes were the bedrock of the grassroots economy, being the primary drivers of most everyday monetary transactions, such as the payment of wages or in real estate deals. The Financial Action Task Force-an inter-governmental organisation that develops policies to combat money laundering-in an October 2015 report titled “Money Laundering through the Physical Transportation of Cash”, estimated the amount of physical cash involved in crime to be hundreds of billions of dollars globally. Try this: as many as 600 million Indians probably don’t have bank accounts, central bank data show.

Some critics question whether demonetization will also hit counterfeiting and terrorist funding, two other reasons Modi cited for the demonetization. Much of India’s cash-based economy has ground to a near standstill.

Now, many are forced to deposit their money in banks, which will increase cash flow within the banking system.

“There is no such proposal before the government on restricting domestic gold holding”, the source said.

India’s prime minister, Narendra Modi, is gambling that this temporary pain will be worth it. This is beyond commendable.

Arvind Kejriwal, the present Chief Minister in Delhi and Aam Aadmi Party Chief (AAP), has his doubts about the demonetization of the rupee notes and what turmoil it is presently causing to common people along with his “corporate friends”.