The government introduced the demonetization law, demonetizing all Rs. 500 and Rs. 1000 notes, on an attempt to ban fake currency and garner better control on black money operations and holdings.
Here are the salient features of what the government announced recently on demonetization:
1. It has been observed that over the counter exchange of the old currency notes of Rs. 500 and Rs. 1000 denomination has shown a declining trend. It has further been felt that people may be encouraged and facilitated to deposit their old Rs. 500 and Rs. 1000 notes in their bank accounts which would encourage people who are still unbanked, to open new bank accounts. Consequently, there will be no over the counter exchange of old Rs. 500 and Rs. 1000 notes after midnight of 24.11.2016.
2. The Government had also permitted various exemptions for certain transactions and activities wherein payment could be made through old Rs. 500 and Rs. 1000 notes. It has been decided that all these exemptions, with the additions and modifications as detailed below, may be continued for a further period from the midnight of 24.11.2016 up to and inclusive of 15.12.2016:-
(a) Payments for the transactions under all the exempted categories will now be accepted only through old Rs. 500 notes;
(b) Payment of School fees up to Rs. 2000 per student in Central Government, State Government, Municipality and local body schools;
(c) Payment of fees in Central or State Government colleges;
(d) Payments towards a prepaid mobile top-up to a limit of Rs. 500 per top-up;
(e) Purchase from Consumer Cooperative Stores will be limited to Rs. 5000 at a time;
(f) Payment of current and arrear dues for utilities will be limited to only water and electricity. This facility will continue to be available only for individuals and households;
(g) Considering that the Ministry of Road Transport and Highways have continued the toll-free arrangement at the toll plazas up to 2.12.2016, it has been decided that toll payment at these toll plazas may be made through old Rs. 500 notes from 3.12.2016 to 15.12.2016.
(h) Foreign citizens will be permitted to exchange foreign currency up to Rs. 5000 per week. Necessary entry to this effect will be made in their passports. (Necessary instructions in this regard will be issued by the RBI.)
With a great motive to counterfeit illegal money in the country, the demonetization has brought in a breath of fresh air into corrupted incomes. However, the implementation of the act has not been heralded as a feasible one and many have been complaining of inconveniences. Financial changes require time to display their impact and we must wait out this demonetization scheme as well, for a holistic assessment of its impact on the Indian economy.