Indian one-thousand rupee banknote (Photographer: Dhiraj Singh/Bloomberg)

Withdrawal Of Currency Notes: The RBI Explains

The government has decided to take existing 500 and 1000 rupee notes out of circulation in an attempt to curb the menace of black money. Starting midnight on Tuesday, Rs 500 and Rs 1,000 currency notes will cease to be legal tender. Citizens can start exchanging their notes at banks and post offices starting Thursday and have till the end of the year to give in the old notes.

On its website, the Reserve Bank of India explained the manner in which this exchange will take place, the reasons behind it and its implications.

Why this scheme?

The incidence of fake Indian currency notes in higher denomination has increased. For ordinary persons, the fake notes look similar to 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. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw has been introduced.

What is the scheme?

The legal tender character of the notes in denominations of Rs 500 and Rs 1000 stands withdrawn. In consequence thereof withdrawn old high denomination (OHD) notes cannot be used for transacting business and/or store of value for future usage. The OHD 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 or at any Head Post Office or Sub-Post Office.

What should citizens do next?

Starting from November 10, 2016, members of public/corporates, business firms, societies, trusts, etc.,holding these notes can tender them at any office of the Reserve Bank or any bank branch and obtain value thereof by credit into their respective bank accounts.

For their immediate cash needs, these notes of value upto Rs. 4,000 per person can be exchanged for cash over the counter of these bank branches. Public are advised to present a valid proof of identity for availing this exchange facility.

Value credited to their bank accounts can be freely used by issue of cheques or by remitting through various electronic modes of transfer like NEFT, RTGS, IMPS, mobile banking, internet banking etc.

Are there restrictions on cash withdrawals?

Cash withdrawals from bank accounts, over the bank counters, will be restricted to a limited amount of Rs. 10,000 per day subject to an overall limit of Rs. 20,000 a week from November 9, 2016 till end of business on November 24, 2016. The limits will be reviewed after this.

All ATMs and other cash machines will remain shut on November 9, 2016 to facilitate recalibration. When ready, they will be reactivated and cash drawals from ATMs will be restricted to Rs. 2,000 per day per card up to November 18, 2016 and the limits shall be raised to Rs. 4000 per day per card from November 19, 2016.