Handling the Sudden Ban on Rs. 500 and Rs. 1000 notes

In a shocking move, the prime minister announced that Rs. 500 and Rs. 1000 notes cannot be used as legal tender from midnight 8th Nov. 2016. The main issue is handling this crisis for next week or so until things calm down.

ATMs will not work for the next two days and banks the next day as they prepare themselves for this transition.  Thankfully, we can still buy petrol with these notes until Nov. 11th. But they may not accept these notes – they will anyway have to give it to the bank! Bus and railway booking can also be done with these notes.

PM Modi Says Rs 500 And Rs 1,000 Notes Being Discontinued

 

To handle this suddenly development calmly

  1. we need to first scrounge around for Rs. 100, Rs. 50. Rs. 10 Rs. 5 notes and coins to pay for small transactions in the next few days.
    • We just finished checking the money in our God-pot 🙂 – a pot in which we put some money each month to be handed over to a temple. Feels like Chennai floods all over again!
  2. Use debit or credit card as much as possible. Offer to do a bank transfer.
  3. Avoid going to banks or ATMs for the next few days if possible. Expect long queues perhaps in fear! Same for petrol bunks.
  4. Lend some cash to hired help.
  5. Provide exact change to shops that do not take plastic money.

rs-500-ban-india

The Rs. 500 or Rs. 1000 that you have can be deposited before Dec. 30. They will then become valuable again. Else up to Rs. 4000 can be exchanged at Banks or post offices. This is not necessary, in my opinion.

Please share if you can think of anything else.


About the Author M Pattabiraman author of freefincal.comM. Pattabiraman is the co-author of two books: You can be rich too with goal based investing and Gamechanger. “Pattu” as he is popularly known, publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis, including a robo advisory template for use by beginners. Contact information: freefincal {at} Gmail {dot} com He conducts free money management sessions for corporates (see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints.

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Updated: November 8, 2016 — 11:35 pm

20 Comments

Add a Comment
  1. very very short…

    1. You are free to add more.

  2. Hi Pattu,
    What could have prompted Govt for such a drastic move.

    1. We can only speculate but I think they must have intel about how these notes are funding terrorism.

  3. I love the fact that you mentioned about maids

  4. Hello

    What about news of new 500 and 2k rs notes ?
    What I mean – is government planning to introduce new notes with distinct security features to avoid duplication ?

    Thanks

  5. Or this change is permanent ?

    1. 500 and 2000 Rs notes will be circulated in 2017. As of now, no 1000 Rs notes.

  6. Very quick …..
    Surgical Strike of Mr. Modi against Black money, corruption & terresiam….

  7. I fully support this move – will help in curbing black money. However, there is going to be chaos -for example, one of my friends just withdrew 6 lakhs to pay the contractors where he is building a house !! What will he do now!!. Also, another one of my friend has to pay wages to his daily wage employees who do not have bank accounts. he is in a fix !!

  8. Good Move. I use cash exclusively for all my non-online activities. Will need to gather up all the 500s and 1000s and make a trip to the bank to exchange for the newer notes. Bit of an inconvenience ( for the common man), but I think a decent measure to send panic down the spines of black money hoarders. I like that a 2000 Rupee is being introduced. Will lighten my wallet a bit in the future.

  9. New 500 and 2000 rs notes should not be introduced as well, Otherwise, this would open up new loop holes in the system again.

  10. 1) Most real estate agents/builders will feel the heat. most of the money collected through cash goes unaccounted. this move will affect this industry in a big way .
    2) If your friend can prove that this was earned by him & has paid tax, he will not have problem

  11. @Charu – Your comment is sexist. Pattu Sir mentioned ‘hired help’ which is gender neutral. You have stereotyped it to a maid.

  12. Great move, inconvenience will be there until dust settles, later we would have a clean banking system, & greater accountability in all the sectors,
    Why has Rs2000 introduced, wouldn’t this encourage to accumulate black money gain ? Pattu sir, you can come up with another detailed article telling implications in the short & long run, what it would mean to the common man & business man ?

  13. As a lot of the Rs. 500 and Rs. 1000 notes (which constitutes 80% – 90% of the overall currency) is not going to come back into the system, technically, am I a lot richer today :)?

  14. Technically lot of conditions apply, lot richer is not guaranteed in future…should wait & watch.

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