Author Topic: ₹500 and ₹1000 Banknotes are No More Legal Tender  (Read 15020 times)

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Offline Bimat

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₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #60 on: December 01, 2016, 03:33:25 PM »
It started with couple of days, then 10 days and then 50 days. Now finance minister says 'only' one or two QUARTERS. That's SIX months. Does he even know how long a period of six months is for a poor? Or perhaps he means that people will just get used to not having any cash and everyone will stop complaining. That seems to be the strategy?

Just proves how incompetent FM/RBI governor are! Playing with innocent lives! >:(

People's problems only for one or two quarters, says Arun Jaitley

IANS    |  Bhubaneshwar
December 1, 2016   Last Updated at 16:25 IST

Union Finance minister Arun Jaitley on Thursday said the hardships faced by the people after the November 8 demonetisation will last only for one or two quarters but its effect on the Indian economy will be long-term.

"The effect of demonetisation will remain for one or two quarters, but its effect on the economy will be seen in the long term," Jaitley said on the sidelines of the 'Made in Odisha Conclave' here.

The minister thanked Odisha Chief Minister Naveen Patnaik for backing the Centre on demonetisation and the GST (Goods and Services Tax).

Hailing Odisha's high growth rate this year, Jaitley said: "If Odisha's state gross domestic product grows faster than the national GDP, it will help in improving the national GDP."

Odisha registered a State GDP of 9.2%, 2% higher than the national GDP.

Source: Business Standard
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Offline Bimat

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₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #61 on: December 02, 2016, 07:37:46 AM »
Rest of the discussion has been moved to Living Room.

Aditya
It is our choices...that show what we truly are, far more than our abilities. -J. K. Rowling.

Offline Bimat

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₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #62 on: December 08, 2016, 05:14:25 AM »
No Windfall For Government From Undeposited Old Notes, Says RBI Chief Urjit Patel

Written by Surajit Dasgupta | Last Updated: December 07, 2016 20:00 (IST)

Urjit Patel, Reserve Bank of India Governor, on Wednesday debunked speculation that the central bank will pay a big dividend to the government in terms of old notes that are not deposited into the banking system.

The speculation has been based on the premise that the RBI's liability from notes that do not return to the banking system will be extinguished. And that it could transfer the benefit from that to the government.

Dr Patel however said today that even if the banned notes that do not return are taken out of circulation, "they still carry the liability of the RBI as long as only the legal tender characteristic status is withdrawn."

"Actually, the withdrawal of legal tender characteristic status does not extinguish any of the RBI's balance sheet and therefore there is no implication on the balance sheet as of now. So that question does not arise as of now - not just by withdrawal of legal tender character (of notes)," Dr Patel said at a press conference after RBI kept the repo rate or key lending rate unchanged today.

Madan Sabnavis, chief economist at CARE Ratings, said this basically means that instead of the RBI printing new money in place of the currency not returned and transferring that amount to the government, the central bank could keep it as special reserve to meet a possible future liability. "The notes will be on the RBI balance sheet without the status of legal tender and more likely will reside in the reserves of the central bank," he said.

A deadline for depositing 500 and 1000 notes, banned by the government last month in an attempt to unearth black or untaxed money, ends on December 30.

The RBI today disclosed that banks have so far received roughly Rs 11.5 lakh crore in banned notes as deposits. When the government withdrew legal tender status last month from 500 and 1000 rupee notes, it removed 86 per cent or Rs 15.5 lakh crore of the currency in circulation.

The Economic Research Department of SBI in a note last week estimated that Rs 1.5 lakh crore of old notes might not be deposited in the banking system.

The RBI chief today said the decision to remove old Rs 500 and Rs 1,000 bank notes from the system was not taken in haste. There had to be a high level of secrecy surrounding this decision, he said.

Source: NDTV
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Offline dheer

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Re: ₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #63 on: December 08, 2016, 06:44:04 AM »
A deadline for depositing 500 and 1000 notes, banned by the government last month in an attempt to unearth black or untaxed money, ends on December 30.

The RBI today disclosed that banks have so far received roughly Rs 11.5 lakh crore in banned notes as deposits. When the government withdrew legal tender status last month from 500 and 1000 rupee notes, it removed 86 per cent or Rs 15.5 lakh crore of the currency in circulation.

The Economic Research Department of SBI in a note last week estimated that Rs 1.5 lakh crore of old notes might not be deposited in the banking system.

11.5 lakh crore and still 3 more weeks to go. All hell will break loose if we get near 14 lakh crore or strangely more than that  ;D

But its a positive to see that there are no plans by RBI to transfer [if any] gains to Govt. I think even DS Subba Rao had mentioned that it would be fool hardy of RBI to indulge in such step.
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Offline Bimat

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₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #64 on: December 08, 2016, 06:50:00 AM »
One estimate is of ₹17 Lakh crores (I'm not kidding, it's an estimate by finance ministry officials). Whatever 'extra' money that is collected, is it in the form of counterfeit currency? If so, does that mean that RBI will take liability of counterfeit notes too?

Initially, it was expected that only ₹10-₹11 Lakh crore would be deposited. So this is indeed a rude shock for them. They are not even recovering the printing cost of new notes (~₹25,000 crores for ₹500 and ₹2000 notes only)!!!

Aditya
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Offline dheer

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Re: ₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #65 on: December 08, 2016, 07:24:22 AM »
One estimate is of ₹17 Lakh crores (I'm not kidding, it's an estimate by finance ministry officials). Whatever 'extra' money that is collected, is it in the form of counterfeit currency? If so, does that mean that RBI will take liability of counterfeit notes too?

Initially, it was expected that only ₹10-₹11 Lakh crore would be deposited. So this is indeed a rude shock for them. They are not even recovering the printing cost of new notes (~₹25,000 crores for ₹500 and ₹2000 notes only)!!!

Aditya

RBI technically can't take liability of such notes. In past this liability was with the merchant / holder of the note. However when it was found that quite a few fakes found their way into Banks Vaults and ATM's; RBI instructed that Banks take this liability.

Now in the rush to exchange the notes, they are all deposited into RBI currency chest. So indirectly it seems RBI has taken up the liability of fake notes.

If the number don't tally; I don't think fake notes would be in such a large proportion. It can't be in lakh corers ... it would be more in few thousand crores ...

The other possibility of mismatch is goof-up the RBI book-keeping; over the years they are clueless, poor / shoddy book-keeping.

It also means that all the black money got converted into white via multiple methods.
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Offline Bimat

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₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #66 on: December 08, 2016, 08:45:22 AM »
To promote cashless transactions, government is now proposing that no service tax (currently 15%) will be charged for payments done using credit or debit card upto ₹2000.

I think this is a very risky move, as crooks will now find new ways to evade service tax. Make multiple bills of less than ₹2000, use different debt/credit cards to make these payments and so on. This will also help in generating more black money (Suppose my hotel bill is ₹2200, I ask hotel owner to make bill of ₹1900 and pay ₹1900 using card with no service charge and remaining ₹300 in cash. At the end, we both are happy! :D)

Aditya

It is our choices...that show what we truly are, far more than our abilities. -J. K. Rowling.

Offline dheer

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Re: ₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #67 on: December 08, 2016, 08:59:12 AM »
To promote cashless transactions, government is now proposing that no service tax (currently 15%) will be charged for payments done using credit or debit card upto ₹2000.

I think this is a very risky move, as crooks will now find new ways to evade service tax. Make multiple bills of less than ₹2000, use different debt/credit cards to make these payments and so on. This will also help in generating more black money (Suppose my hotel bill is ₹2200, I ask hotel owner to make bill of ₹1900 and pay ₹1900 using card with no service charge and remaining ₹300 in cash. At the end, we both are happy! :D)

Aditya

Service charge is only on the commission. Generally the commission on the cards is in the range of 2.5%. So this is 15% of 2.5%; i.e. around 0.375% on transaction value.
The main issue of low acceptance of the Credit / Debit Cards is the 2.5% that merchant looses. Plus cash gives him ability not to report this to Govt and hence report lower income and pay less VAT/Sales Tax/Corporate Income Tax etc.

To me this is cosmetic, doesn't really change much.

The Government is trying to promote digital payments that get recorded. So in your example earlier the Hotel would not pay any tax on Rs 2200. This would not show up in his books. This it would be Black Money. Now when you swipe for Rs 1900. This would get recorded as income and leave a trail if there is no corresponding tax in this corporate returns.
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Offline Bimat

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₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #68 on: December 08, 2016, 09:03:07 AM »
Service charge is only on the commission. Generally the commission on the cards is in the range of 2.5%. So this is 15% of 2.5%; i.e. around 0.375% on transaction value.
The main issue of low acceptance of the Credit / Debit Cards is the 2.5% that merchant looses. Plus cash gives him ability not to report this to Govt and hence report lower income and pay less VAT/Sales Tax/Corporate Income Tax etc.

To me this is cosmetic, doesn't really change much.

The Government is trying to promote digital payments that get recorded. So in your example earlier the Hotel would not pay any tax on Rs 2200. This would not show up in his books. This it would be Black Money. Now when you swipe for Rs 1900. This would get recorded as income and leave a trail if there is no corresponding tax in this corporate returns.

That was my understanding too, but all the news reports so far say 'no 15% service tax' and not 'no commission'. That 2% commission is anyway charged only if the amount is high and depends on the seller.

See report.

Aditya

Edit: Some news papers are reporting that no 2% commission on use of debit/credit card upto ₹2000 which is as per our understanding. Where do find official press release regarding this by the government?
It is our choices...that show what we truly are, far more than our abilities. -J. K. Rowling.

Offline Bimat

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₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #69 on: December 08, 2016, 10:50:51 AM »
RBI technically can't take liability of such notes. In past this liability was with the merchant / holder of the note. However when it was found that quite a few fakes found their way into Banks Vaults and ATM's; RBI instructed that Banks take this liability.

Now in the rush to exchange the notes, they are all deposited into RBI currency chest. So indirectly it seems RBI has taken up the liability of fake notes.

If the number don't tally; I don't think fake notes would be in such a large proportion. It can't be in lakh corers ... it would be more in few thousand crores ...

The other possibility of mismatch is goof-up the RBI book-keeping; over the years they are clueless, poor / shoddy book-keeping.

It also means that all the black money got converted into white via multiple methods.

Government/RBI's estimate is that there's fake currency worth 400 crore rupees (4000 millions) in circulation. Compare that with our GDP of ~ 125 Lakh crores!

Aditya
It is our choices...that show what we truly are, far more than our abilities. -J. K. Rowling.

Offline dheer

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Re: ₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #70 on: December 08, 2016, 01:12:55 PM »
That was my understanding too, but all the news reports so far say 'no 15% service tax' and not 'no commission'. That 2% commission is anyway charged only if the amount is high and depends on the seller.

See report.

Aditya

Edit: Some news papers are reporting that no 2% commission on use of debit/credit card upto ₹2000 which is as per our understanding. Where do find official press release regarding this by the government?

Any time you swipe a card there is commission, 2.5% or 2% or whatever. This is what is agreed between the Merchant accepting the card and his bank. Most merchants factor this into the cost and hence do not charge you anything additional. i.e. You swipe 100, merchant only gets 98. Some merchants like Jewellery shops, petrol, etc will swipe 102 for 100 bill and pay merchant 100.

For a short period, PayTM, Card Companies Visa / Master etc to tide over short term had made announcement that they will reduce / waive these charges. This is temporary till Dec 30.

On the other hand the 15% service tax is more permanent in nature.
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Offline Bimat

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₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #71 on: December 10, 2016, 08:33:44 AM »
Post note ban, old coins & notes’ business in tatters

10 December 2016, New Delhi, Zafar Abbas

Delhi’s Khari Bawli market might be famous for dry fruits and spices but a side look at the pavements would bring into your notice men sitting with medium height tables with a red tablecloth over it. They aren’t selling any fruits or spices but have small and large old coins scattered all over. They deal in old coins and tattered notes. The demonetisation has affected them badly.

Mahesh Jain, who runs this small business for 30 years now says: “Our business has been ruined. People will buy necessary food items first and no one will spend on old coin collection. Its been hard to make ends meet now. We dealt in old money and coins but demonetisation has ruined our business.”

At a walking distance from Jain sits Manoj who too is in the same business for several years now. He has his own sorrows to tell. “Business is down by 70 per cent. This decision has been heavy on us.

Earlier on a normal day, I used to make around Rs 500. Now, I hardly get Rs 100-200. At this age do you expect me to do some other business? That isn’t possible.”

They give you old coins for a nominal price of Rs 10 or 20 depending on the size of the coin and the year they were made in. Three of the customers who wished to change their tattered Rs 20 and 10 notes were turned away by these sellers.

When this reporter moved ahead, another man Naresh Jain narrated his ordeal. “We are not changing the tattered old notes, even Rs 10 and 20 notes are not changed now. There is uncertainty, what if the government decides to change these notes as well? So for now, we are too cautious. We have incurred heavy losses.”

As you take a turn from Khari Bawli towards Chandni Chowk, another old man with specs on the pavement will catch your attention. When asked how is the business going he said: “I come here these days to pass time. We are not accepting small tattered currency notes now. We are not having huge sum to invest. I have some other small things to sell and the old coins and notes’ business has flopped.”

Source: Millennium Post
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Offline Figleaf

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Re: ₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #72 on: December 10, 2016, 11:44:54 AM »
The story sounds true. Since the amounts involved are very small, these people can be helped, but not by the government. Here is a method, based on the micro-credit idea. Let's call it a temporary sale.

Someone with a steady job proposes a small loan to one of these old men, secured by some of his coins. Say the loan is for Rs 2000 (€28). Pick presentable coins with a sales vale of about Rs 2000 and hand over the note. Make a contract in duplicate that says the loan ends in six months at the latest and the coins will be returned when the loan is paid. Interest is zero percent. Both parties sign the contract and you take a selfie with the dealer and the contract.

The risk is minimal. The amount is small, so you can lose Rs 2000 at most, minus whatever the proceeds of the coins. If you have a steady job, that should not be a big problem. These old men have nowhere to go, so they'll not be tempted to run. Experience with micro-loans repayment is pretty good. Meanwhile, you will have kept a coin dealer in business for at least 6 months. They get to eat, you get a friend and a place to go to for buying coins.

Peter
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Offline Bimat

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₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #73 on: December 17, 2016, 02:45:55 PM »
Ads flashing in Marathi newspapers that old ₹500 and ₹1000 banknotes will be exchanged on commission basis. Home delivery also possible. Contact number is also given. Incredible India, truly! :o

Aditya
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Offline Bimat

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₹500 and ₹1000 Banknotes are No More Legal Tender
« Reply #74 on: December 19, 2016, 04:58:05 AM »
If you had black money and if you paid a commission of 30-40% to an agent to make it white just after the decision of demonetization, then you have been fooled. Economic Times now reports that situation has completely reversed now and these agents are offering 6-8% interest on black money, with a lock-in period of 1 year or so. :o

While all this is very hard to digest for me atleast (I'm still trying to find out how can they provide interest on huge sums of black money), it does sound possible. An industrialist last week posted on Twitter that some people are buying old ₹1000 banknotes for a 5% premium. Didn't believe in him then, but since this report has appeared, I'm convinced that he wasn't kidding.

Irrespective of my (or anyone's) views regarding demonetization, this is a VERY bad news for RBI/other banks/government. Interest on black money means direct loss to the banks. Terrible.

Aditya
It is our choices...that show what we truly are, far more than our abilities. -J. K. Rowling.