Venkat Raman –
The decision of the Indian government to demonetise its ‘Mahatma Gandhi Series’ Rs 500 and Rupee 1000 notes effective midnight of November 8, 2016 sent waves of panic across the world, although it should not have any impact.
Unlike many other major currencies, the Indian Rupee is not a trading currency and in fact not even a floating currency, meaning that it can be obtained on demand for exchange of another similar legal tender such as the US Dollar or the New Zealand Dollar.
The rules concerning the movement of the Indian Rupee of all denominations are rather rigid and the Indian government adopts a no-tolerance attitude towards defaulters. The Foreign Exchange Management Act (FEMA), which replaced the Foreign Exchange Regulation Act (FERA) in 1999, allows free and easy transfer of monies accruing from sale of properties in India (depending on the number of years of ownership and that such transfer be restricted to $1 million per year).
Rigid rules of FEMA
Money can be moved between bank accounts and other forms of transactions but not cash. Those holding Non-Resident Indian (NRI) status – that is people holding Indian passports but ordinarily not resident in India, could take Indian currencies while travelling overseas, but an order issued by the Reserve Bank of India on September 16, 2013 stipulated that NRIs could carry up to 10,000 Indian rupees as cash beyond Immigration and Customs for use in the shopping areas but exchange all left-over monies for foreign currencies at the kiosks placed near the exit gates.
Some airports may not have this facility and in such cases, NRIs should not carry Indian currencies beyond immigration and customs.
The following is a set of Questions & Answers issued by the Indian government on the wake of its decision to demonetise 500 and 1000 Indian Rupee notes on August 8:
- Why is this scheme introduced?
The incidence of fake Indian currency notes in higher denomination has increased. For ordinary persons, the fake notes look like genuine notes, even though no security feature has been copied. The fake notes are used for anti national and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. India remains a cash based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. To contain the rising incidence of fake notes and black money, the scheme to withdraw has been introduced.
- What is this scheme?
The legal tender character of the existing bank notes in denominations of Rs 500 and Rs 1000 issued by the Reserve Bank of India till November 8, 2016 (hereinafter referred to as Specified Bank Notes) stands withdrawn. In consequence, thereof, these Bank Notes cannot be used for transacting business and/or store of value for future usage. The Specified Bank Notes can be exchanged for value at any of the 19 offices of the Reserve Bank of India or at any of the bank branches of commercial banks/ Regional Rural Banks/ Cooperative banks or at any Head Post Office or Sub-Post Office.
- Does the scheme apply to pre-2005 banknotes of Rs 500 and Rs 1000? How much will I get?
Yes, the specified banknotes include pre-2005 banknotes in the denominations of Rs 500 and Rs 1000. You will get value for the entire volume of notes tendered at branches of banks and at RBI offices.
- Can I get all in cash? Why not?
No. You will get up to Rs 4000 per person in cash exchange irrespective of the size of tender and anything over and above that will be receivable by way of credit to bank account. The Scheme does not provide for any amount, given its objectives.
- I have no account but my relative or friend has an account; can I get my notes exchanged into that account?
Yes, you can do that if the account holder relative/friend gives you permission in writing. While exchanging, you should provide to the bank, evidence of permission given by the account holder and your valid identity proof.
- How much time do I have to exchange the notes?
The scheme closes on December 30, 2016. The Specified banknotes can be exchanged at branches of commercial banks, Regional Rural Banks, Urban Cooperative banks, State Cooperative Banks and RBI till that date.
For those who are unable to exchange their Specified Bank Notes on or before December 30, 2016, an opportunity will be given to them to do so at specified offices of the RBI, along with necessary documentation as may be specified by the Reserve Bank of India.
- I am right now not in India, what should I do?
If you have Specified banknotes in India, you may authorise in writing enabling another person in India to deposit the notes into your bank account. The person so authorised should come to the bank branch with the Specified Banknotes, the authority letter given by you and a valid identity proof (Aadhaar Card, Driving License, Voter ID Card, Pass Port, NREGA Card, PAN Card, Identity Card Issued by Government Department, Public Sector Unit to its Staff)
- I am a foreign tourist. I have these notes. What should I do?
You can purchase foreign exchange equivalent to Rs 5000 using these Specified Bank Notes at airport exchange counters within 72 hours after the notification, provided you present proof of purchasing the Specified Bank Notes.