Rupee 500 and 1000 note ban (USD $7.33/$14.67)

kmiklas

kmiklas

I'm trying to get my head around this move.

Apparently they banned these bills because peeps were hoarding them and not paying taxes

http://money.cnn.com/2016/11/14/news/india/india-rupee-currency-anger/

http://www.bbc.co.uk/news/amp/37970965

What would I do if I were in their shoes? Imagine if, suddenly, USD $100 and $50 bills became worthless, and had to be exchanged for $200 dollar bills?

I'd probably lose faith in the currency itself, and not trust the new 2500 rupee notes. I'd keep my savings in gold, silver, or even another currency entirely; perhaps GBP, EUR, or (of course) USD.
 
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It is mainly to erase black money and/or to invalidate counterfeit currency allegedly printed and circulated from their 'neighbor' :). Also this is move is to avoid ML (Money Laundering) which is done thru illegal outfits in Middle East (called Hawala).
 
kent said:
It is mainly to erase black money and/or to invalidate counterfeit currency allegedly printed and circulated from their 'neighbor' :). Also this is move is to avoid ML (Money Laundering) which is done thru illegal outfits in Middle East (called Hawala).
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So, they can exchange their INR500 and INR1000 for the new INR2000 notes, correct?
 
Yes and No. You have limits on how much you can exchange. If it exceeds certain limit, you have to show the source of your funds and have to explain whether you have paid tax on the income or not etc.. This measure is to force people pay tax and declare their sources of income correctly.
 
Limit is around 100usd a day, more than that one has to deposit it in his bank account if I read correctly . Jeesh, 100bucks a day in a cash economy...
AFAIK hawala doesn't launder money, it allows mostly to transfer money overseas through underground channels, with obviously less paperwork and usually better exchange rates than through official channels. Similar systems exist in every asian country I spent time in (not that it makes it anymore legal)
Anyway an outrageous decision from Modi, I hope it backfires nastily.
 
luisHK said:
Limit is around 100usd a day, more than that one has to deposit it in his bank account if I read correctly . Jeesh, 100bucks a day in a cash economy...
AFAIK hawala doesn't launder money, it allows mostly to transfer money overseas through underground channels, with obviously less paperwork and usually better exchange rates than through official channels. Similar systems exist in every asian country I spent time in (not that it makes it anymore legal)
Anyway an outrageous decision from Modi, I hope it backfires nastily.
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It is an outrageous decision, however it's pretty indisputable that hawala, although designed for and mostly used for honest purposes, is a money launderer's dream and is also often abused by money launderer's.
 
Sig said:
it's pretty indisputable that hawala, although designed for and mostly used for honest purposes, is a money launderer's dream and is also often abused by money launderer's.
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Definetely, while I never heard of underground money changers beeing very regarding on the origin of funds that transit through them, I read about some beeing entangled in money laundering affairs, and guess the amount of money that transit there to save money on regular wire transfers by individuals is dwarfed by transactions aiming to avoid taxes, circumvent capital controls or move money from illegal activities.
I'm not familiar with India (although much more with indian traders) but there's a lesson to remember here, about ilegal activities that are tolerated by the powers in place. Well, they are until they are no longer, when it can get quite painful. Which reminds me of one of the most famous such service providers in Bangkok years back, not only the company was known from almost everyone, but their office was even indicated on a tourist map of Bangkok, quite amazing and no idea how the situation has evolved a coup and a dead king later. Most people popping up in the office wanted to change some cash
behind the travel agency front, but more complex international transactions were also possible, also known to most that needed them, and certainly known to authorities.
 
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