Numismatists can still hold Old Currency Notes

[dheer]

Source TOI

Ordinance soon to impose penalty for holding old notes

NEW DELHI: The government will soon issue an ordinance imposing a penalty for possession of scrapped Rs 500 and Rs 1,000 notes+ after the 50-day window for depositing old notes in banks ends on December 30.
Possession of the old notes will only be permitted for the purpose of research and numismatics and the measure is intended to end any prospect of a "parallel currency" continuing after the deadline.
The ordinance will, however, have a clause allowing people to deposit scrapped notes at RBI branches as promised by the government, after giving reasons for doing so.
The ordinance is necessary to complete the legal process of demonetisation as banks will stop accepting deposits of old currency after Friday. The ordinance is expected to be cleared by the Cabinet in a day or two.
"Possession of old notes must be made illegal and punishable to ensure that no one is forced to accept scrapped currency as payment or wages," an official source explained.
The ordinance is expected to be replaced by a law in the Budget session of Parliament, likely to begin by the end of January.
The provision on providing a reason for exchanging old currency at RBI branches is intended to facilitate submission of scrapped currency after Rs 500 and Rs 1,000 notes have been legally demonetised.
The ordinance is needed to end the liability of the RBI governor to pay the bearer of the scrapped notes the value promised. Similar laws were enacted in the past after demonetisation of Rs 1,000, Rs 5,000 and Rs 10,000 notes in 1978. So far, the formal process of demonetisation was not completed as old currency was being accepted by banks and till recently at fuel stations and for purposes such as paying utility bills. This could not have been possible if demonetisation had been formally completed.
Sources said there will be no change in the option to allow holders of old currency to deposit them with the RBI by March 31.
Of the Rs 15.4 lakh crore worth of currency that was scrapped, Rs 14 lakh crore has been deposited in banks or exchanged.

[dheer]

NEW DELHI: The government will soon issue an ordinance imposing a penalty for possession of scrapped Rs 500 and Rs 1,000 notes+ after the 50-day window for depositing old notes in banks ends on December 30.
Possession of the old notes will only be permitted for the purpose of research and numismatics and the measure is intended to end any prospect of a "parallel currency" continuing after the deadline.

There was no clarity to the Numismatists community as to what will happen to their collection, will they be penalized for their collection. If this article is to be believed, then it is indeed good news for the Numismatic community.

[Bimat]

I do not understand why do they have problem with someone (not necessarily a collector) holding old notes. It causes no damage to economy, it's just a worthless paper after the deadline so they should just leave it. Making it a punishable offence makes no sense IMO...

Aditya

[dheer]

If someone has not deposited the cash, it is more likely that the money is illegal. They need to be caught and punished. Imagine someone has thousand crores in old notes, he get caught. There can be no action against him. He is not even required to explain the source of such notes. This sounds incorrect.

[Bimat]

Since all the money is being returned to banking system, I doubt if anyone will really have crores of rupees on old notes (and why would someone really keep it just like that, even if it's black?). Those who had them (black) have already converted it to white. Only small amounts may remain with some, whatever may be the reason...

Aditya

[srinath]

Hi All,
I am thankful Mr Dheer for the above news, I can now stop worrying about depositing these notes in the bank but i would like to know from experts here if there would be any value to these notes in a long future (considering the inflation) considering my theme which is governor wise and year it was printed but not with insets or fancy numbers would that be of any value?

Thanks in advance
Sri

[Bimat]

Hi All,
I am thankful Mr Dheer for the above news, I can now stop worrying about depositing these notes in the bank but i would like to know from experts here if there would be any value to these notes in a long future (considering the inflation) considering my theme which is governor wise and year it was printed but not with insets or fancy numbers would that be of any value?

Thanks in advance
Sri

I don't think that old ₹500 and ₹1000 notes of Gandhi (2005) series will appreciate in value in near future. Will take lot of time. Few particular notes (like misprints, fancy numbers etc) may fetch good value, though.

Also, looking at the way government is modifying laws, I wonder if they will allow selling of these notes for a premium? (It's not allowed even today, but it's vastly ignored. But now things may change).

Aditya

[srinath]

Thanks Adithya

The value of  old ₹500 and ₹1000 notes of Gandhi (2005) series was in circulation and hence they fetched only face value but now that the whole series is scrapped wouldn't it make a point to ponder if these notes could fetch some worth down 20 yrs from now?


Regards,
Sri

[Bimat]

Thanks Adithya

The value of  old ₹500 and ₹1000 notes of Gandhi (2005) series was in circulation and hence they fetched only face value but now that the whole series is scrapped wouldn't it make a point to ponder if these notes could fetch some worth down 20 yrs from now?

20 years is a long time (at least for me )...Sure, the value will increase, but not much. As billions of these notes were printed and thus, every collector/dealer has plenty of those already. Only the rarer versions will be more costly, but that's just a guess...

Aditya

[srinath]

20 years is a long time (at least for me )...Sure, the value will increase, but not much. As billions of these notes were printed and thus, every collector/dealer has plenty of those already. Only the rarer versions will be more costly, but that's just a guess...

Aditya

20 yrs is a long time of course but thats where i am planning to retire
If the value doesnt increase with inflation then there is no point in collecting them.
14 out of 15.4 lakh notes have been already in the banks and due to stringent rules of punishment for hoarding more notes may get deposited by march end.
Considering the current situation, we still have 1.4 lakh notes which haven't reached the banks
we do not know how many of those 1.4 lakh notes are still hoarded and how many will be deposited in the banks or how many are damaged and cannot reach the banks
but if the future value is nominal then its better to deposit in the bank.

Again i would like to give an overview on my collection in the gandhi series :

we had 4 governors: Bimal Jalan, YV Reddy, D subba rao and Raghuram Rajan
where the year of printing started some where in 2000 but the year on notes where started from 2005 and ended in 2016 which makes it 13 -14 different notes x 2 (1000&500) and additionally there were notes with rupee symbol in 2011 and telescopic numbers in 2013
I do not hold any fancy numbers or misprints etc

Please share your expert advice's whether this theme could be of any worth?

Regards,
srinath

[Bimat]

14 out of 15.4 lakh notes have been already in the banks and due to stringent rules of punishment for hoarding more notes may get deposited by march end.
Considering the current situation, we still have 1.4 lakh notes which haven't reached the banks
we do not know how many of those 1.4 lakh notes are still hoarded and how many will be deposited in the banks or how many are damaged and cannot reach the banks

Small correction: The total value of these notes was 15.4 lakh crores (and not 15.4 lakh crore notes). There were 15710 million (old) ₹500 notes and 6330 million ₹1000 notes in circulation when the decision was taken. The figure of 14 lakh crore rupees back in banking system is based on sources, not actual figure given by RBI. RBI hasn't published the data after December 9 regarding amount deposited so far in old notes. It is said that the amount has already crossed 15 lakh crores (14 lakh crores was on December 16). So it's clear that majority of the old notes will be returned to RBI.

As far as collecting these as a post retirement investment, I don't think it's a wise idea (I'm happy if proven wrong ) Assuming that the value will increase considerably (Adjusting inflation over 20 years), you really need to have LOTS of these old notes (plus, buyers to buy them! You don't know how the market will be in 2040), to make some visible profit...

Aditya

[dheer]

20 yrs is a long time of course but thats where i am planning to retire
If the value doesnt increase with inflation then there is no point in collecting them.
14 out of 15.4 lakh notes have been already in the banks and due to stringent rules of punishment for hoarding more notes may get deposited by march end.
Considering the current situation, we still have 1.4 lakh notes which haven't reached the banks
we do not know how many of those 1.4 lakh notes are still hoarded and how many will be deposited in the banks or how many are damaged and cannot reach the banks
but if the future value is nominal then its better to deposit in the bank.

Again i would like to give an overview on my collection in the gandhi series :

we had 4 governors: Bimal Jalan, YV Reddy, D subba rao and Raghuram Rajan
where the year of printing started some where in 2000 but the year on notes where started from 2005 and ended in 2016 which makes it 13 -14 different notes x 2 (1000&500) and additionally there were notes with rupee symbol in 2011 and telescopic numbers in 2013
I do not hold any fancy numbers or misprints etc

Please share your expert advice's whether this theme could be of any worth?

Regards,
srinath

With the general caveat, one can't really predict the future ... My take on this

There are around 67 notes of Rs 500 with Governor/year/Inset theme. Around 45 in Rs 1000 ignoring the earlier issues.
Then there are people who also collect prefix. I don't have a count, but this would be substantial.

Before I go into what will happen, if we look at the past, the Rs 1000, Rs 5000 and Rs 10,000 were demonetized as we all know in 1978. There was substantial quantity that was not returned. From a ordinary collectors point of view Rs 1000 was too much to collect, quite a few had not even seen a Rs 1000 note in their lifetimes. During 1978, there may hardly be dozens who collected such items. The grade I officers salary used to be in few hundreds.

In 1990, due to inflation, Rs 1000 meant nothing, there was interest in collecting these notes. Rs 1000 notes then came into dealers hands, initially at very low price. Today the Rs 1000 note of Sen Gupta ... or the Temple notes [as they carried the image of Brihadeeswarar temple] go routinely for Rs 10K to Rs 15K; notes in good quality far excess of Rs 30-50K.  Similarly by HV Iyengar around 1.5 lacs. But B Rama Rau around Rs 30K.

The number of collectors of Notes is still substantially less than the hoard of notes that were not returned. So why did the price not come down? These are worthless piece of paper and they should be selling at Rs 100 - 200 ...

The number of Rs 5000 or Rs 10,000 notes I have seen in auctions is very minimal.

I can get  into multiple theories as to why this is happening ... but that is not the question.

Coming back to the question:
The number of people who collect Rs 500 and Rs 1000 today is substantial and this is bound to grow over period. Unlike in past, hoarders know there are collectors out there. In fact quite a bit of black money is captured / stored as rare notes so that even if there is IT raid, the value can't be proved.

In the immediate 6-8 months, there will be a general scramble. Remember the hoarders can't directly approach dealers because they will be afraid to get caught. After layers of middlemen, the market will find out the demand for the notes and the supply. During this process, dealers will also discover which notes / series / years / insets / prefixes / etc are rare which are abundant. There will be price discovery in 2018 and prices will kind of firm up by 2019 and remain at that level for some time, increase / decrease along with general market.

So my prediction; immediately in next 2-6 months, dealers will try and dump the notes they are holding at 1.2 to 1.5 times the rate saying golden opportunity etc. Toward the end of 2017, things will start showing real picture. In my view the earlier issues and the latest issues will be rare, along with few inset of intermediate years.

So in 20 years, yes the notes should return you back a nominal rate of 10% at the minimum.

[dheer]

Also, looking at the way government is modifying laws, I wonder if they will allow selling of these notes for a premium? (It's not allowed even today, but it's vastly ignored. But now things may change).

Aditya

I am very confident that whatever be the law, it can easily be circumvented. For example there is no law for me to sell an envelope with my daughter's painting for Rs 5000. And just for sample demonstration, I will be putting in a Rs 500 notes and incidentally it has a serial number of 999999 or 786786 [but the painting on envelope is different]

[Bimat]

So in 20 years, yes the notes should return you back a nominal rate of 10% at the minimum.

Inflation adjusted? Even if yes, then also a return of only 10% (or even 20%) over 20 years doesn't sound interesting to me. (Add to that cost of keeping those notes safe in good condition etc). In general, any kind of investment in coins/banknotes is very risky and such decision shall be taken very carefully.

Aditya

[dheer]

Inflation adjusted? Even if yes, then also a return of only 10% (or even 20%) over 20 years doesn't sound interesting to me. (Add to that cost of keeping those notes safe in good condition etc). In general, any kind of investment in coins/banknotes is very risky and such decision shall be taken very carefully.

Aditya

Looks like a typo I did not clarify enough. 10% year on year.