The prevalence of black money and the running of a parallel economy has, for decades, been a hindrance to India’s economic growth. On November 8, 2016, in a historic move, the Indian Prime Minister has declared that Rs. 500 and Rs. 1000 currency notes would no longer be accepted as legal tender. The proclamation has been applauded by citizens and the media as an extremely bold step in the fight against black money.
The announcement will affect the operations of your small business and impact your cash-flow, here is a breakdown of the details that you need to understand:
- As of midnight, 8th November, existing Rs. 500 and Rs. 1000 Currency Notes are not valid and cannot be accepted in exchange of goods and services with a few exceptions
- From 72 hours(of the announcement) to Nov 11, government hospitals, petrol stations authorized by public sector oil companies, milk booths, and crematoria and burial grounds will accept the currency
- For the next 72 hours, railway, bus and air tickets counters will accept these notes
- All banks and ATMs are closed on 9th November
- In a 50-day window, from 10th Nov 2016 to 31st Dec 2016, citizens can deposit/exchange the Rs. 500 and Rs. 1000 currency notes, in their possession, at their banks or exchanges it at the post office with currency notes of lower denominations. For the deposit, you will need to submit a valid identity card like Aadhar card, PAN card or Driver’s license
- In the period after the above timeframe (30th December 2016 to 31st March 2017) Rs. 500 and Rs. 1000 notes will be accepted in select RBI Branches where the depositor will need to make a declaration
- Starting November 10th, new currency notes of Rs 500 and Rs. 2000 denominations will be circulated
- November 10th onwards, cash withdrawals from ATMs will be limited to Rs. 2,000 per day while withdrawals from your bank account will be limited to Rs. 10000 per day and Rs. 20000 per week
- There are currently no restrictions on non-cash payments such as credit/debit card payments, Cheque, DD or Electronic fund transfer
As a small business owner, this announcement will disrupt the functioning of your business but you need to create a viable plan of action.
Step 1: Fill in the below depositor form and head to the bank or post office to deposit the Rs. 500 or Rs.1000 currency notes you have in your possession. Remember to carry a valid ID card. The following form will also be available at the bank.
Step 2: Re-evaluate your cash flow, determine what you require for everyday functioning and what functions can be performed through electronic or cheque payments. Read this article on Top Tips to Maintain a Healthy CashFlow to know more about improving your cashflow
Step 3: Create a weekly cashflow projection to know how much you need to periodically withdraw for the daily operations of your business
Step 4: Withdraw the required amounts as per the legal limits of the new Rs. 500 and Rs. 2000 currency when released
Follow these steps and the impact of the de-legalization of the Rs. 500 and Rs. 1000 currency notes will be minimized and in time, you can go back to your routine of business as usual.